The Changing External Environment and the Risks We Should Focus on

The fiscal year ended March 31, 2022 was like the previous fiscal year in that Takamiya’s performance was impacted to an extent by the COVID-19 pandemic. Although the spread of infections has shown signs of settling down, and there was some resumption of construction work and activity related to infrastructure improvement, we were unable to achieve results as planned.
The construction industry is in a period of great change. In Japan, civil engineering work has been more active than building construction in recent years. In particular, maintenance and repair work on expressways and railroads, especially as public works projects, is beginning to pick up. Initiatives for maintenance and repair to enable continued use of the nationwide transportation network, which has long supported Japan, is a job that also has great significance for society. The challenge of reinforcing and maintaining infrastructure and buildings in preparation for increasingly severe disasters is also all around us. Economically, although inflation and the unpredictable international situation pose challenges, we recognize that we have built a solid position in the market, and will strengthen our position to expand our business growth as well as the social value we provide.
On the other hand, there are also risks to be concerned about. We are avoiding and mitigating risks related to the soaring price of steel, a raw material, in ways such as passing along price increases. In the supply chain, the situation overseas is hard to predict in some respects, so we are duplicating and optimizing production and procurement as much as possible and taking action to ensure that supply chain issues do not slow down our business expansion, which is now gaining momentum.

Business Environment and Initiatives in the Current Fiscal Year

Our domestic business has been impacted by suspensionsand delays in some construction work. However, interestfrom the market in our next-generation scaffolding,Iq System, remains high, as reflected in the strongperformance of both sales and rentals. In rentals, werecorded the highest utilization rate ever in the previousfiscal year, and in sales, we achieved solid growth driven bynew purchases, additional purchases, and replacements ofconventional scaffolding. We are currently preparing toexpand production capacity for the Iq System by 1.6 times,with plans to eventually double it. Construction work onour high-performance agricultural greenhouses wasaffected by customer restraint in purchasing, partlybecause of a shortage of foreign workers due to theCOVID-19 pandemic. We think a recovery in demand willtake time—roughly six months to one year—but we aremaking preparations to be ready when demand doesrecover, including continued collection of cultivation datathrough demo cultivation using the actual products.

In our overseas business, we have started to see arecovery trend in market conditions in each country where we do business. In Vietnam, the lockdown was lifted andwe were able to conduct manufacturing activities asplanned. In the Philippines, railway infrastructureimprovement projects are underway, and construction is infull swing. In Korea, the new government is helping toincrease safety awareness in construction, especially forscaffolding. We have a firm budget for safety, as in Japan,and we expect to see increasing demand for the IqSystem, which offers a high level of safety. Thus, theenvironment for conducting our business activities in thesecountries has steadily been improving. On the other hand,there is the exchange rate issue. For our overseas business,risks and opportunities are not always two sides of thesame coin, but we will take measures for each of them toensure that we can maximize opportunities for businessexpansion. We recognize that we have made progress inour respective efforts to maintain and expand our topmarket share in next-generation scaffolding; respond tothe market shift to maintenance and repair construction;nurture businesses beyond the temporary equipmentsector; and grow revenue at overseas business bases.

The Meaning of Transformation in the Medium-Term Management Plan

The Medium-Term Management Plan that started in 2021is an aggressive plan. As a precondition for achieving thisplan, we must change and transform our company itself.This past year, we were unable to increase earnings aswe were in the process of transformation, and we alsocontinued to be greatly impacted by the externalenvironment, as I mentioned earlier. Given theperformance goals in the final year of the plan, it may befair to say that our target figures for the fiscal year endingMarch 31, 2023 are rather conservative. However, I amconfident that we can steadily achieve our performancetargets in the second and third years by carrying out thistransformation.

The transformation we are pursuing is abouttransforming our business foundation, which we havebeen enhancing into a new “platform” that can createdemand on its own, independent of the externalenvironment, and generate stable earnings. Until now, thetemporary equipment for construction work industry hasbeen in a situation where macro and market conditionswere driven by major construction companies, and ourown business figures depended on how high or lowconstruction investment was within that environment.
For similar reasons, when I look at our stock price, whichrepresents the valuation of our company by the capitalmarkets, I find it hard to believe that our true value isbeing fairly assessed, and I feel that our future is not beinglooked at enough. Because of that, in our pursuit ofsustainable growth, we need to break away fromcontinued dependence on the external environment. Weconcluded that one requirement for that was to build a“platform” that would allow us to create demand on ourown. The transformation we are pursuing is a switch to abusiness model that produces stable earnings that are notoverly impacted by changes in the external environment.
The platform we will provide is the very businessfoundation we have continually improved up to now. Itincludes the functions of development and manufacturing,sales, rental, design and installation, and management andlogistics, and these functions will not only be used byTakamiya, but will also be open to customers. Customerswill be able to use the infrastructure of Takamiya’stemporary equipment for construction work business as ifit were part of their own business. For example,customers beyond the Kansai area will be able toparticipate in projects related to the expected futuredevelopment of the Osaka Bay area by using Takamiya’sequipment supply locations, logistics networks, andinstallation network. In other words, customers will beable to expand the scale, area and range of their traditionalbusinesses. An attractive platform that enables ourbusiness foundation and Takamiya itself to provide highadded value for customers is the kind of platform we areaiming for.
The key to achieving this transformation is digitaltransformation, or DX. In essence, DX is the use of digitaltechnology to streamline and raise the efficiency ofoperations and tasks. The construction industry that weare in is making more progress than before in digitalizationand DX, but it still has many analog aspects. This situation,where much work is still being done with analogtechnology, is one reason why the capital markets viewthis business as being out of step with the current timesand environment. The fact is that DX-related companiesare capturing attention in the capital markets, especially in growth stocks. By advancing DX, we will not only improveefficiency in our business operations, but will enhance theconvenience of the services we offer to customers andaccelerate our transformation.

Our success in building the platform and achievingtransformation will hinge on how much we can increasethe number of stakeholders—customers, partners, and shareholders willing to support us. To do that, we need tokeep our customers and partners informed about whatwe are currently doing, and have them empathize withus. Without that empathy, expansion of our platformwill not be possible. Sharing our platform with manypartners is the future I envision for Takamiya, and forthe construction industry.

The Drivers of Our Transformation: People and DX

The most important requirement for realizing thistransformation is to attract and develop people whohave goals and a vision, and will carry out that vision. Wecannot afford to hire people blindly. Even if they chooseto join us, it is meaningless if they leave soon after that.Therefore, since 2018, we have lowered our rate ofinvestment in rental assets and made investments intraining and creating a system for people in their third and fourth years. This continues today, and we are leveragingthe power of DX to “visualize” workstyles and officeenvironments. After all, we cannot increase the valuewe provide to customers unless we improve our ownwork productivity. By raising our own efficiency, we willincrease the added value we deliver to customers. This isthe only way that we can enhance profitability. We willproduce scaffolding more efficiently and have customers use it more efficiently. DX is also necessary to boost ouroperating rate. That in turn will further raise the efficiencyof our workers. The first year of the Medium-TermManagement Plan was the year for building thefoundation. I feel the response has been quite positive.The numbers should start to steadily show up in thesecond and third years as a result.
I have long been telling our people to “raise efficiency,raise productivity, and if you want to rest, rest. If you wantto earn more, do more,” and then keep transforming. Wewill reward people appropriately for a certain level ofresults. DX will not be realized unless employees feel thatthere is a solid return in it for them, too. The Company’sprofit and the profits that employees receive must bealigned with each other. DX is necessary for realizing eachof these objectives, but is not the objective in itself. Thisline of thinking was boosted by the acceleration of remotework due to the COVID-19 pandemic. Work where youwant to work. Get a return on the hard work you put in. Attimes like that, I want the Company to be a “place of relaxation.” Remote work inevitably leads to feelings ofisolation and alienation. I believe the Company will play apart in resolving the lack of communication, and insupporting mental and physical health. We now havedigital signage in several locations in the company.Information from each operating base is now in a formthat can be monitored from anywhere in the country. Workfreely, of your own volition, by choice—this is veryimportant. The turnover rate of new graduate hires wasdramatically lower this year and last year. I believe thisdemonstrates that our company, which is in the middle ofa transformation, is seen as attractive by today’s digitalnative generation, both for its environment and as a job.
Some people were saying that we should go after salesin the rental business, which had been performing well,and focus more on investing in rental assets. But I did notthink that was the way forward, and have instead beenpromoting human resource investment. We now have thefoundation in place for the future we want to bring about.

Sustainability and Governance Support Takamiya’s Growth

Takamiya moved to the Prime Market of the Tokyo StockExchange in April 2022, and I believe that is where wemust be. To realize transformation and achieve sustainablebusiness growth, we will need to raise funds from awide range of investors, including overseas institutionalinvestors. And to do that, we have to give dueconsideration and attention to environmental, social, andgovernance (ESG) initiatives. We will carefully addresswhatever is necessary for growth, one by one. This year,we changed our governance structure to a “Company withan Audit and Supervisory Committee,” and added threeindependent outside members—Yoshihiro Sakatani, TeijiJoko, and Sachie Kato—to the Committee. I believe wehave enlisted the participation of people who will give us the most candid opinions possible.

I view externalrequests, such as the Corporate Governance Code, aspositive guidance for determining what Takamiya shoulddo, and how we can continue to grow in the future. Thesame is true for environmental issues and initiatives for theTask Force on Climate-related Financial Disclosures (TCFD)recommendations, and for promoting the empowerment ofwomen in the workplace. If there are companies (not justours) that have not kept up with changes in the world andare finding it difficult to do so, I believe that means theyhave not sufficiently adapted to the times and environment,and are not keeping pace with current trends. I would liketo take a positive approach with the view that what areoften called challenges are really opportunities for growth.

To Our Stakeholders

First, a message to employees. I would like each one ofyou to think about how working in this day and age isabout being happy while having many options, increasingprofit for yourself, and ultimately, how you contributeto the Company and society. And most importantly, toenjoy doing so. I hope to realize this major change andtransformation together with all of you.

To our partners: Takamiya is attempting a majortransformation. We will develop a “platform” that goesagainst the conventional wisdom of the industry andserves as a new kind of infrastructure for the temporaryequipment business. This platform will provide previouslyunheard-of high-value-added services that our partnerswill want to use, as it will improve their business revenueand will be the key to broadening the potential of theirbusinesses. Some of you may feel it will be difficult to respond to the dramatic changes at our company.However, this transformation will eventually change notjust our company but the whole industry. Since we cannotcomplete this transformation alone, I hope to expand theplatform together with as many partners as possible.

For our shareholders, I would like to apologize forthe times that we caused concern about our financialperformance. At present, we are still thought of asa scaffolding company. However, we are makingsteady progress in solidifying the foundation for ourtransformation. The platform business will fundamentallychange our earnings structure, and we will release newinformation about this platform from time to time. Isincerely hope you will look forward to the expansion ofour new businesses and platform business, and continueto support Takamiya with a long-term perspective.