At the outset, we would like to express our deepest sympathies to all those affected by the Noto Peninsula Earthquake of 1 January 2024.

As a member of the Japan Dredging and Reclamation Engineering Association (JDREA) and Japan Federations of Construction Contractors, we have continued to support for recovery and reconstruction from initial response mainly through Hokuriku Branch. In FY2024, Noto Earthquake Reconstruction Office was established in Nanao City, Ishikawa Prefecture, and we fully engaged in the recovery and reconstruction.

Soichiro Asano, the founder of the company, was born in Toyama Prefecture in Hokuriku region. We will continue to contribute to society in the spirit of our founder's wish to ‘Benefit Society’ to hope that life in the disaster-affected areas of the Hokuriku region will return to normal as soon as possible.

Looking Back at FY2023

Looking back at FY2023, the first year of the Medium-Term Management Plan, all three divisions (civil engineering, building construction and overseas) achieved their profit targets, with record orders and operating profit. And ROE results in 11.4%. Although we started the fiscal year with an uncertain outlook for rising prices triggered by the situation in Ukraine, we were fortunately unaffected by the cost increase because many of our constructions period were two years.
In addition, we were able to deliver the infrastructure improvement projects and construction work without accidents or problems, with high quality and within the specified construction period. The fact contributed greatly to our record-high profits. We also reaffirmed the importance of construction management.
In deepening ESG management, we have also been working on carbon neutrality as a top priority issue. The Group's “Scope 1+2” emissions in FY2023 were reduced by 8.3%, exceeding the reduction target of 7.5% when FY2020 is used as the reference value.
On the other hand, “Scope 3” emissions were reduced by only 0.2% compared to the same reduction target as “Scope 1+2” due to an increase in business volume, but we will continue to focus on further reduction efforts such as ZEB* in buildings and introducing low-carbon materials.
In the evaluation of our efforts by external organizations in FY2023, we received an “A-” rating in the CDP score for climate change, including CO₂ emission reductions, up two ranks from the “B-” of the previous year, and our relative position is within the top 17%, which we believe indicates that we have achieved a certain level of success.
In addition, in a corporate sustainability assessment by S&P Global, an external ESG rating organization, we received an ESG score of 41, on par with major Japanese general contractor companies and were highly rated, placing us in the top 15% of the world's 306 architecture and engineering companies (as of May 20, 2024).

*ZEB stands for Net Zero Energy Building. It aims to achieve a zero annual primary energy balance for consumption.

Integration of Business Strategy and Human Resource Strategy: Integration of Business Strategy and Human Capital Management (≒ESG Management)

The Medium-Term Management Plan aims to achieve both organization development to promote business expansion and human resource development to realize the long-term vision “Build a prosperous society and connect all the people over the world for the better future”. In this context, the basic policy for deepening ESG Management is to “integrate business and human resource strategies” to realize our long-term vision.

The S (Society) and G (Governance) of ESG are thinking about things mainly through people. At ESG presentation meeting, many branches presented their efforts in cooperation with local communities. Local communities are also comprised of people. In this sense, I realized that ESG management is almost like human capital management.
In other words, “ESG management ≒ human capital management”. In addition, human resource strategy is based on investing in people, as described in the concept of human capital management. Therefore, “integration of business strategy and human resource strategy” also means “integration of business strategy and human capital management (≒ESG management),” and we are promoting ESG management as an approach to achieve it.

We aim to instill “psychological safety” among our employees. As well as enhancing workplace gatherings and introducing 360-degree feedback to executive positions, we implement meetings at model sites for each team unit to think about what they should do to improve their work style. By expanding these efforts, we will permeate the concept throughout the company.

In addition, in FY2023, we conducted an open recruitment process for regional general positions, most of which are filled by women, and approximately 80% of them (92 people) were converted to regional career-track position. I have high expectations for the future activities of these new career-track employees.
In addition, we have increased the number of female outside directors and executive officers by one each. The ratio of women on the board of directors are two out of 12, bringing the total to 16.7%, and the two female executive officers are responsible for the Human Resources Department and the ESG Corporate Planning Department, respectively.

The upper limits on overtime have been applied to the construction industry since FY2024, and I am keenly aware of the importance of my own responsibility to lead the industry in reforming the way we work. In February 2024, I participated as a panelist in the Life-Work Balance Exhibition TOKYO 2024. As a part of efforts to promote ESG Management and Human Capital Management, I introduced that we held the “ESG presentation event” and “Work Style Reform Presentation Event” as in the previous year to show that we share the status of initiatives at each branch and tips and know-how on work style reform throughout the company.

Understanding of the social “S” is getting to spread within the company, and the meaning of human capital management will spread along with it. We believe that once such understanding of the social “S” of ESG and the “psychological safety” that forms the basis of human capital management are secured, governance “G” will be easier to build. Since strengthening governance is the foundation of a sustainable company, we will work on it firmly to improve our corporate value.
In addition, enhanced governance must permeate throughout our group companies. In 2023, governance issue was discovered at one of our group companies. Taking seriously the recommendations of the internal investigation committee chaired by an outside attorney, we are further strengthening our internal control and compliance systems, and all directors and employees of our group are working together to implement specific measures to prevent recurrence.
Furthermore, leader employees, including group company managements, participate in events such as company-wide ESG presentation and Work Style Reform Presentation to promote sharing the direction and awareness of ESG.

Efforts to Expand the Domain

From FY2024, we established Technology Strategy Office under the direct control of the President. It will lead across the technology divisions, which are dispersed among various departments, including TOA Research & Development Center, and develop technologies that will contribute to management. First, we will work on speed up the development process by focusing on the advancement of our existing technologies using AI and carbon neutrality initiatives.
In TOA Research & Development Center, Environmental Technology Group has been renamed as” Blue/Green Infrastructure Technology Group” from this fiscal year. We will continue to actively engage in related technological research and development and will further develop it through joint research with external parties and field offerings from various stakeholders.
In the carbon neutrality field, as new infrastructure developments are expected in the future, we will firmly develop our business with both existing and new customers, and we will also actively engage in carbon pricing overseas where systems are already in place. The domestic civil engineering division has secured a certain scale of projects such as port construction projects related to national land resilience. With increase of defense expenses is expected in the future, the division intends to steadily work on projects ordered by the Ministry of Defense and construction projects for the U.S. military.

In recent years, the domestic construction division has been expanding its business by increasing sales, mainly in its strong areas of housing and logistics. We also aim to further expand in the fields of office, medical welfare, and government construction.
In International General Headquarters, while civil engineering projects for ODA are expected to rise steadily, we will strive to expand building construction field. We established a local subsidiary in Indonesia, and will work to expand building construction business in the country.

Toward the Realization of 〈TOA2030〉

Now we have approximately 470 billion yen of construction work on hand, and there are several large logistics warehouse-related projects under construction that we have received in 2023 and 2022. In addition, large defense-related port construction projects will also make significant progress in the current fiscal year.
As a result, we expect net sales of 300 billion yen (up 5.7% year-on-year) in FY2024, and we will first focus on these construction projects with the highest priority by ensuring reliable construction management and safety control.
In terms of capital policy, in FY2023 we undertook large-scale acquisition of treasury stock, increased dividends, cancelled treasury stock, and conducted a stock split. In FY2024-2025 we plan to pay a dividend payout ratio of 40% or more.

Finally, I would like to reiterate our practices to realize our long-term vision 〈TOA2030〉, “Build a prosperous society and connect all the people over the world for the better future.

1. We will enhance the happiness of our employees through human capital management. We also enhance and maintain governance system as our basis operation.
2. We will gradually expand the scale of our business and enhance our organization, including in new areas of business, by utilizing profits earned in our areas of expertise in the construction business, and integrate our business strategy with our human capital strategy.
3. We will continue to invest in technology development, other business, and in human capital for current and future human resources, we will continue to challenge to enhance our specialized area and expand domain areas.
4. Ultimately, by deepening ESG Management, we aim to create a company that is profitable in both our specialty area in building construction, and in new domain areas (e.g., carbon neutrality), in other words, we aim for management that integrates non-financial goals with financial goals.

We will continue to engage in constructive dialogue with our stakeholders, including shareholders, investors, customers, partner companies, and employees, while reviewing our measures as appropriate and constantly striving to enhance our corporate value.

Takeshi Hayakawa, President and Representative Director