Financial Review

Yasuo Kotera
Executive Vice President

FY2021.3 Performance and FY2022.3 Business Environment Outlook

In FY2021.3 (the fiscal year ended March 31, 2021), Obayashi's net sales and measures of profitability including operating income were lower than the previous fiscal year. Among the reasons why, in the domestic building construction business, there was a lull in large projects in urban areas. In North America and Singapore, COVID-19 interrupted construction projects. We believe that the key going forward will be responding to the changing construction demand and how long it takes for stagnant capital expenditure to recover. Another challenge will be ensuring the profitability of large redevelopment projects in urban areas. Although the demand for such projects remains strong, the competition is intense. As for our business overseas, there is some concern that COVID-19 will cause economic stagnation, leading to a drop in construction investment.

Cash flow from operating activities in FY2021.3 only reached ¥24.8 billion. Among the reasons why, there were many large projects in the domestic building construction business that had just begun, so progress claims received were not very great. Moreover, as COVID-19 continued to spread, we maintained higher than normal levels of liquidity in case of emergency. We prepared a system that could provide funds to Group companies in Japan and overseas to adapt to the needs of the moment. For that reason, some funds procurement was moved forward. As for how much Obayashi can borrow from financial institutions, we remained able to secure means for sufficient procurement, for example expanding our committed credit line. Our policy is to procure funds appropriately at the right time.

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Progress on Medium-Term Business Plan 2017 and Investment for Achieving the Vision for the Future

FY2022.3 is the final year under Medium-Term Business Plan 2017. Under this plan, the Group aims to achieve growth beyond the framework of our existing businesses by taking the changes in the business environment as an opportunity for growth and using them to prepare the way for the future.

Medium-Term Business Plan 2017 Major Management Indicator Targets

Targets for March 31, 2022 Results as of March 31, 2021
Equity ratio
¥900 billion
¥931.0 billion
Net interest-bearing debt
(Interest-bearing debt)
(¥250 billion)
¥7.4 billion
(¥265.9 billion)
Targets for FY2022.3 Results for FY2021.3
Net sales Around ¥2,000 billion ¥1,766.8 billion
Operating income Around ¥150 billion ¥123.1 billion
Profit attributable to owners of parent Around ¥100 billion ¥98.7 billion
Profit attributable to owners of parent per share (EPS) Around ¥150 ¥137
Return on equity (ROE) Over 10% 11.3%

Our efforts for further enhancement of our financial base and reinforcement of our equity capital to build a strong management foundation achieved the target management indicators we had set for the end of FY2021.3: equity of ¥900 billion and an equity ratio of 40%. On the other hand, we were not able to stably maintain sales and profit targets in FY2021.3. Net sales and profit/loss indicators like operating income fell below management indicator targets for the first time in three years.

As for investment, our plan is to invest ¥400 billion over five years as a means of preparing the way for the future, and as of the end of FY2021.3, we have invested ¥371.0 billion cumulatively. We are using these funds to strengthen the four existing pillars and create new business domains for the realization of our Vision for the Future. Examples include investments in the real estate leasing business and renewable energy business. We are also building next-generation production systems utilizing IoT, AI, and robotics, which include automation, autonomization, and remote control of construction machinery. We are developing construction DX technology, offshore wind power technology, and technology for large-scale updates of infrastructure. Furthermore, we are making strategic investments in startups that are creating innovation. For major investments, our Investment Committee reviews and evaluates the Obayashi Group's investing activities as a whole. For example, the committee considers the appropriate scale of investment given the Group's current financial status and assets and the consistency of individual investments with the Group's investment policy and their significance in terms of business strategy. It also seeks to find a proper balance of risk and return and monitor businesses after we decide to launch them.

Progress on Capital Expenditure Plan (FY2018.3-FY2022.3) of Medium-Term Business Plan 2017

Five-year plan Results through FY2021.3 Outlook for FY2022.3 Five-year total
R&D of construction technologies ¥100 billion ¥90.7 billion ¥25 billion ¥115.8 billion
Construction machinery and business facilities ¥50 billion ¥44.3 billion ¥20 billion ¥64.4 billion
Real estate leasing business ¥100 billion ¥153.0 billion ¥50 billion ¥203.0 billion
Renewable energy business and others ¥100 billion ¥50.5 billion ¥10 billion ¥60.6 billion
M&As and others ¥50 billion ¥32.2 billion ¥5 billion ¥37.3 billion
Total capital expenditure ¥400 billion ¥371.0 billion ¥110 billion ¥481.0 billion

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Policy on Shareholder Returns and Shares That We Own in Our Customers' Businesses

Our basic policy on shareholder returns is first to try to sustain stable dividend payouts over the long term. We consider the need to further enhance our financial base and build up internal reserves so that we can develop technologies and make capital expenditures for the future. Then, we aim for a consolidated dividend payout ratio of 20% to 30%. Our annual dividend in FY2021.3 was ¥32 per share for a consolidated dividend payout ratio of 23.2%. We will continue the practice of dialogue and robust disclosure for shareholders and institutional investors to heighten mutual understanding and will endeavor to increase shareholder returns as we work to ensure that current growth investment boosts future profits.

Profit Attributable to Owners of Parent per Share (EPS) and Dividends per Share

The shares that we own in our customers' businesses are meant to maintain and strengthen our trade relationships with them. However, the Obayashi Board of Directors periodically assesses the valuation profit or loss of these shares and comprehensively considers our capital costs and the profitability from the business returns that result from maintaining and strengthening trade relationships. If the shares we own in our customers' businesses are no longer so meaningful for marketing purposes, we sell them as appropriate. In the past 10 years, Obayashi has sold 92 issues (26%) of the total for ¥80.1 billion and we aim to reduce these holdings further.

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Achieving the Vision for the Future

The COVID-19 pandemic has accelerated the great changes happening in the world's societies and economies. Facing a crisis unlike anything before, enterprises are under pressure to significantly overhaul their business strategies. The Group's business environment is undergoing massive change too. It is precisely because the times are so uncertain and complex that we aim to create diverse sources of revenue and further enhance our corporate value. This we will do through the development of innovative technology, the advancement of digitalization, and other transformations of our management foundation and business models in ways that go beyond established concepts.

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U.S. Disclaimer - Unsponsored ADR (American Depository Receipt) 
Effective October 10, 2008, the United States Securities and Exchange Commission (SEC) made it possible for depository institutions or banks to establish ADR programs without the participation of a non-U.S. issuer (a so called "Unsponsored ADR")." An ADR, or American Depositary Receipt, is a negotiable receipt, similar to a stock certificate, which is issued by a U.S. bank or depository to evidence an ordinary share of a non-U.S. issuer that has been deposited with the U.S. bank or depository. ADRs permit a U.S. investor to purchase in a U.S. market an interest in a non-U.S. issuer's securities. An ADR program which is unsponsored is set up without the non-U.S. issuer's cooperation or even its consent. Obayashi Corporation (hereinafter the "Company") does not support or encourage the creation of unsponsored ADR facilities in respect of its securities and in any event disclaims any liability in connection with an unsponsored ADR. The Company does not represent to any depository institution, bank or anyone nor should any such entity rely on a belief that the Web site of the Company includes all published information in English, currently, and on an ongoing basis, required to claim an exemption under U.S.Exchange Act Rule 12g3-2(b).


The information posted on Obayashi Corporation's English website was translated from Japanese into English and presented solely for the convenience of non-Japanese speaking users. The purpose of the English information provided herein is to provide the stakeholders of Obayashi Corporation with its financial and non-financial information for their better understanding of Obayashi Corporation and its group companies, and is not to solicit any person or entity to buy or sell Obayashi Corporation's securities of any kind. If there is any discrepancy between original Japanese information and its English translation, the former will prevail. Any statements made about Obayashi Corporation's future plans, forecasts, strategies and performances are forward-looking statements subject to risks and uncertainties. Forward-looking statements included herein are made based on the information available at the time of the release of the statements. Due to various factors, actual result may vary from what was anticipated in the forward-looking statements.

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