TAKAMIYA ACTION

Business Environment in the Current Fiscal Year

The construction industry, in which the Takamiya Group is involved, as in the previous fiscal year, continued to be impacted by the COVID-19 pandemic in the fiscal year ended March 31, 2023. Although there were some delays in the start of construction due to the soaring raw material prices, exchange rate fluctuations, and labor shortages, business continued to perform well, centered in the Tokyo metropolitan area, partly due to private sector renovation work resulting from the need to reinforce and maintain infrastructures and buildings in preparation for increasingly severe disasters. The shortage of labor is not a new problem and is not a problem unique to the construction industry, but this year was a year in which it really became apparent. Overseas, there are issues such as the prolonged conflict between Russia and Ukraine and financial instability. However, in the Philippines, a country in which the Group is developing its business, the prolonged lockdown was lifted and we are seeing signs of a gradual recovery such as Japan International Cooperation Agency (JICA)-related infrastructure projects having set in motion.
Unfortunately, in the fiscal year ended March 31, 2023, we were unable to improve our performance as we expected. Profits were generally in line with our plans, but we failed to achieve our net sales performance forecast. In the sales business, both earnings and profits declined due to the impact of customer restraint in purchasing due to price revisions implemented in response to soaring raw material prices. On the other hand, the rental business and overseas business posted increases in both earnings and profits. In the rental business, we recorded the highest utilization rate since the pandemic due to increased dependence on rental equipment resulting from customer restraint in purchasing. In the overseas business, while there were lockdowns in the Philippines, rental sales of temporary equipment in South Korea were favorable, and manufacturing in Vietnam for Japan proceeded as planned. Over the las two years, the entire construction industry has been slowed down by the pandemic. Although the outlook remains uncertain, the business environment is steadily recovering.

Takamiya Platform to Realize Business Transformation

Responses and Challenges During the “First Year of the Platform”

The fiscal year ended March 31, 2023 was the initial year of our platform development, and so we designated it as the "first year of the platform." During the year, we made steady progress in transforming into a platform company. The Group’s transformation initiatives to build a platform, focused on the Kansai area, have been accepted by our customers, and we are steadily moving forward with the proactive development of services. OPERA and Iq-Bid, our proprietary developed digital tools, can be accessed from anywhere via smartphones and other devices, while RABOT can be used freely, as if they are the users’ own know-how. We are also expanding content to maximize user friendliness, including enhancing Takamiya Lab. West functions. We have received positive feedback that our customers are well-aware that we are building the basic foundations for a platform. Many people were initially concerned to use the internet and online shopping, but these are now accepted as an indispensable part of our daily lives. Similarly, the day when using platforms and their content is a natural and normal part of daily life is not far off. Platform-related sales increased from ¥600 million in the previous fiscal year to ¥1.6 billion, and the number of users is steadily increasing. We expect the speed of user increase to accelerate in the future, but we also need to visualize various data and present it as evidence so the platform can be used with a sense of security. This will enable users to check the status of platform usage and get a feel for its convenience and profitability. Also, by visualizing our initiatives, we will provide a sense of security to our customers. In addition to using the visualized information in-house to expand the functionality of the platform, we will accelerate these initiatives such as by introducing AI (Artificial Intelligence).
In July 2023, we identified Takamiya’s materiality (key issues) in order to further clarify the issues that we face in promoting our platform development. We sought the opinion of various stakeholders, including outside experts, so as to get a multi-faceted view of our initiatives, and after much internal discussion, we narrowed down the list to eight items. During the process of formulating our materiality, we received much feedback from stakeholders that will boost our platform development and comments concerning their expectations in the Company. Growing as a company, Takamiya will work to deliver value to society broadly and act with more awareness of the need to train human resources that will support our growth and of environmental considerations.  

Heading into the Final Year of the Medium-Term Management Plan

The ongoing fiscal year ending March 31, 2024 is the final year of the Medium-Term Management Plan. Due to delays in the recovery of the business environment, we were unable to make the progress we had anticipated over the past two years. As a result, we have concluded that it will be difficult for us to achieve our initial performance goals, and we have revised our target of ¥5.0 billion in consolidated operating income down to ¥3.8 billion. Reviewing the progress made with each of the basic strategies of the Medium-Term Plan, "Develop services that blend hardware and software, with a focus on the Iq System," in other words the establishment of a platform, which is the core of our strategies, has progressed on schedule, as mentioned earlier.
With regard to "Strengthen products for maintenance/repairs and infrastructure redevelopment," in preparation for the full swing maintenance and repair works of aging social infrastructure such as road bridges, tunnels, river management facilities, sewerage pipes, and port and harbor quays that were constructed during the period of rapid economic growth, we are pushing ahead with the product development to meet this trend and are promoting the provision of services in pursuit of offering convenience to customers. The hanging scaffolding, which we have developed as our core products for such maintenance, repairs, and infrastructure redevelopment, have been well received by our customers, despite the tough business environment. We are also promoting growth of the agriculture business and sales expansion of photovoltaic related products as a way to nurture businesses beyond the temporary equipment sector. These businesses also contribute to society from ESG aspects.
In the agriculture business, sales of greenhouses for cultivation have not gone as well as expected mainly due to the lack of subsidies and the shortage of workers due to the COVID-19 pandemic. On the other hand, preparations for the high-demand season have progressed. The "Hanyu Aisai Project," which uses our products, was launched to support agricultural workers in solving the issues they are facing, by collecting data on the cultivation environment, vegetable yields, quality, etc. Our agriculture business not only provides products, but also offers cultivation know-how. In May 2022, we made Yame Kaisei Co., Ltd. our subsidiary through acquisition of its shares, and thereby laying the groundwork to expand and grow our business in the Kyushu area.In photovoltaic related products, we aim to reduce greenhouse gas emissions through introduction of renewable energy, in order to achieve carbon neutrality. Its main product is the next-generation solar carport POGERO, sales of which are steadily increasing.
Lastly, with regard to the strategy, "Redevelop overseas business bases," the impact of restrictions on movement as a result of the COVID-19 pandemic has become minimal, and we are making steady progress with our business foundation development. We have been able to recovery our level of business activities roughly as planned in the Philippines, South Korea, and Vietnam. Due to the progress we have made in the development of our internal management system, we have also improved our profitability.
Although our Medium-Term Management Plan has been reviewed since its formulation, its realization is within sight.

Completing our Transformation by Integrating DX and Management

I believe that transformation of the Group means to reform Takamiya itself. In other words, transformation, which is the main theme as well as the ultimate goal of the current Medium-Term Management Plan, means to transform ourselves into a platformer. Our platform will be using digital networks to centrally manage not only order placing and receiving, but also warehousing at bases nationwide, inventory management, the state of production at manufacturing divisions, and product information including the Iq System.
We have revamped our company website and business cards to change awareness within our Group, as we are transforming from a company that sells and rents scaffolding to an IT company with its own platform. This was due to our realization that the working environment had changed after the COVID-19 pandemic (spread of COVID-19), and that only companies at which the newly hired digital generation in their 20s would want to keep working will survive in the future.
Our Management Philosophy views human resources as the essence of corporate strength. Therefore, we have focused on creating a working environment that can easily reflect the way of thinking of the younger generation, which will build DX that supports transformation, as well as on workstyle reform. We have installed large signage within our offices that allows employees to see, at a glance, how much overtime is being worked and the percentage of paid leave being taken. In addition to introducing new systems such as sabbatical leave, we are also promoting office reforms in line with the new era. We are transitioning from a place of work to a place of communication. We have rearranged our office layout to create open workspaces and introduced a range of ICT tools to enable each and every employee to work on his or her own initiative while considering and choosing where and when, or which facilities he or she works, in an effort to not only make it easier for employees to work, but also to increase productivity. In addition, we have started to reform our appraisal system by introducing incentives and targets, making it easier for the younger generation to work independently. Meanwhile, we have also realized the difficulty of making veteran managers understand DX. This has prompted us to switch to management that emphasizes diversity, which allows managers to maximize their management skills and make the most of their individual abilities. We have established a system to manage the targets which our employees have been working on, to create a system that visualizes necessary information to achieve targets, so that everyone can share and utilize them.
I also believe that raising awareness of our customers is an important issue for us. Compared to other industries, the construction industry has been slower to adopt DX and digitalization initiatives. The industry tends to have an unwillingness to change. Therefore, in order to switch from analog to digital, customers need to understand that they can actually enjoy the benefits. By working to raise the awareness of our customers, we aim to complete the transformation of the Group.

Sustainability and Governance as the Foundation for Growth

The Group is seeking to achieve sustainability by eliminating wasteful construction industry practices and improving efficiency by using transformation to create a completed platform. The construction industry must also take action to deal with the "2024 problem " that will be brought about by revisions to the Labor Standards Act . The restrictions on working hours will make it unfeasible for the construction industry to continue to operate in the same way as it has in the past. However, our next-generation scaffolding, Iq System, has a story height of 190 cm, 20 cm higher than conventional scaffolding systems. This significantly increases work efficiency while greatly reducing the burden placed on workers and the amount of work time involved. Our products and platforms are improving efficiency in various ways. Our platform is also transforming the construction industry as a whole, including customers, switching it to a business system which prevents oversupply of scaffolding, storage space for equipment, etc. This platform makes it possible for us to share the use of scaffolding with our customers. This improves operation rates, reduces dead stock and inventory surplus, and helps produce more efficient construction sites. Furthermore, to combat the issue of CO2 emissions, our platform has made it easy to collect large amounts of scaffolding scrap and recycle it for use in new products as raw materials by melting it in high temperature furnaces. We have already begun expanding our Vietnam Factory and changing the layouts of our factories, promoting DX in our production management. We have prepared the largest and most optimal equipment capable of stable production and set up a system that minimizes excessive raw material procurement and inventory retention. At the aforementioned Takamiya Lab. West, our reductions to truck standby times by achieving the industry’s fastest delivery and collection are certain to produce CO2 emissions reduction benefits. Improving the efficiency of our business operations will also contribute to our ESG initiatives, and we believe that it will produce similar results for our agriculture business and photovoltaic related products. This is because striving to improve our business efficiency also contributes to sustainability.
With respect to governance, in June 2022 we have transitioned to a Company with an Audit and Supervisory Committee, and we are promoting the separation of our executive and supervisory functions. We have strengthened our middle management by positioning general manager-class personnel as part of our management team. We have also shifted members of our management team, such as our directors, from providing executive functions to providing supervisory functions. Through these efforts, we have begun reinforcing the governance of our company as a whole. Furthermore, with regard to our dividend policy, a topic of high interest to our shareholders, we plan to continue to provide stable dividends.

To Our Stakeholders

Our company’s history extends back half a century, and we are now launching a platform and transforming into an IT company. The core of our business operations is also shifting completely to platform business, and our aim is to become part of the infrastructure of the industry of providing temporary equipment for construction work. I am sure that from the standpoints of those in the construction industry, including our customers, this may seem like an incredibly ambitious dream. Knowing that this report, which discloses some of our efforts, will be seen by these industry members fills me with pride and an even stronger dedication to achieving our targets.
Our new employees, who will be a tremendous aid in our achievement of these targets, will be all hired to create this platform. We will no longer be taking a hiring approach of bringing together scaffolding rental sales managers, construction managers, and science students to hire R&D and manufacturing department personnel. In this way, we will move away from Takamiya being a scaffolding manufacturer and rental company, instead using DX to transform ourselves into a platformer.
As part of our Medium-Term Management Plan, we are carrying out our preparations for becoming a platformer that earns the high praise of society. That is precisely why we are able to carry out the transformations, such as reshaping our corporate image and company format, introducing DX, and reforming workstyles, working environments, and offices. We were also able to define materiality, thereby clearly defining our mission.
However, I feel profound regret that we may have not been able to effectively communicate these changes and reforms to our shareholders and investors. We will redouble our efforts to disclose more various information and actively engage in PR and IR activities than ever to accurately communicate and provide everyone with a fuller understanding of our initiatives. We will do our utmost to show how Takamiya is engaging in business activities as a full-fledged platformer in a way that is clearer and easier for anyone to understand. We will work harder than ever to meet the expectations of all of our stakeholders.

October 2023
Representative Director, President and Chairman
Kazumasa Takamiya