Financial Review

Yasuo Kotera
Executive Vice President

Basic Policies under Medium-Term Business Plan 2017

The Obayashi Group adopted its five-year Medium-Term Business Plan 2017 for realizing our "Vision for the Future." The basic policies it enshrines include further enhancing our financial base as we aim to maintain and expand our current level of profit and thereby "building a strong management foundation" which can withstand any changes in the business environment. It also calls for strategic growth-oriented investment as a means of "preparing the way for the future."

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Obayashi's Performance in FY2019.3

Construction investment remained largely robust in Japan and overseas in FY2019.3 (fiscal year ended March 2019). Obayashi benefited from a favorable business environment, productivity-enhancing measures at construction sites and business units, and measures to cut costs and otherwise improve earnings. Previous investments also began to pay off. Consolidated net sales set a new record for the fifth straight year, surpassing ¥2,000 billion for the first time in FY2019.3. Operating income set a new record for the fourth straight year and profit attributable to owners of parent also reached a historic high.

We anticipate similar performance in FY2020.3, as we foresee the high level of projects in hand continuing in the future. Both the FY2019.3 results and FY2020.3 forecast meet the PL targets established in Medium-Term Business Plan 2017. We look forward to steadily maintaining and expanding on this performance in order to create greater corporate value.

Equity and the equity ratio stood at ¥768.9 billion and 34.7% respectively, at the end of FY2019.3. This puts us within sight of our Medium-Term Business Plan 2017 targets of ¥900 billion and 40%. As such, we are on our way to "building a strong management foundation."

Cash flow from operations in FY2019.3 was down ¥69.8 billion from the previous fiscal year, in part because we implemented better payment conditions for our suppliers and subcontractors. Even so, the figure was a positive ¥44.2 billion thanks to income from a thriving construction business and other sources. We used this to enhance our financial base (for example, by lowering interest-bearing debt) and secure the capital to invest in growth. We forecast cash flow will continue to be strong in FY2020.3.

Major Management Indicator Targets of Medium-Term Business Plan 2017

Targets for March 31, 2022 Results as of March 31, 2019
Equity ratio
¥900 billion
¥768.9 billion
Net interest-bearing debt
(Interest-bearing debt)
(¥250 billion)
¥10.5 billion
(¥272.2 billion)
Targets for FY2022.3 Results for FY2019.3
Net sales Around ¥2,000 billion ¥2,039.6 billion
Operating income Around ¥150 billion ¥2155.4 billion
Profit attributable to owners of parent Around ¥100 billion ¥113.1 billion
Profit attributable to owners of parent per share (EPS) Around ¥150 ¥157
Return on equity (ROE) Over 10% 15.6%

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Capital Expenditure Plan for Achieving "Vision for the Future"

Medium-Term Business Plan 2017 includes a capital expenditure plan of ¥400 billion over five years as a means of "preparing the way for the future" to achieve our "Vision for the Future." Priority investments include building next-generation production systems that will use IoT, AI, and robotics to dramatically increase productivity.
Another focus is R&D that could lead to new business areas. Other initiatives seek to diversify and stabilize our earnings sources. To that end, we continue to invest in our real estate leasing business and renewable energy business. We pursue M&A when there is opportunity. We are also stepping up alliances with startups that have leading-edge technology.

Cumulative capital expenditure from the start of Medium-Term Business Plan 2017 through FY2019.3 have reached about ¥189.4 billion. We plan to invest another ¥100 billion in FY2020.3. We are also working actively to take advantage of other good investments without being bound by our capital expenditure plan.

In July 2019, we installed the new Investment Committee to comprehensively evaluate Group investing activities before the Board of Directors debates them. The evaluations range from establishing investment policies to performing monitoring after it is decided to launch a business. In addition, when Obayashi makes a critical investment, this committee assesses the investment risk and whether the return would be greater than the capital cost. Another focus is whether the investment would help increase Obayashi's competitiveness and corporate value.

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

Five-year plan Cumulative through FY2019.3 FY2020.3
R&D of construction technologies ¥100 billion ¥41.5 billion ¥20 billion
Construction machinery
and business facilities
¥50 billion ¥19.8 billion ¥10 billion
Real estate leasing business ¥100 billion ¥74.2 billion ¥40 billion
Renewable energy
business and others
¥100 billion ¥27.3 billion ¥25 billion
M&As and others ¥50 billion ¥26.6 billion ¥5 billion
Total capital expenditure ¥400 billion ¥189.4 billion ¥100 billion

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Policy on Shareholder Returns

Our basic policy on shareholder returns is first to try to sustain stable dividend payouts over the long term. We consider the need to enhance our financial base and build up internal reserves for future investment. Then, we aim for a consolidated dividend payout ratio of 20% to 30%. Our dividends for FY2019.3 were set at a total annual dividend of ¥32 per share (consolidated dividend payout ratio of 20.3%), up ¥4 from the previous year. In FY2020.3, we again anticipate a total annual dividend of ¥32 per share. We will continue endeavoring to increase shareholder returns as we work to ensure that current growth investment boosts future profits.

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

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Promoting ESG Dialogue with Shareholders and Institutional Investors

FY2019.3 saw a rapid expansion of ESG-focused investment around the world. In October 2018, Obayashi issued green bonds, funds from which can only be used in our renewable energy business and green buildings. We followed in June 2019 with sustainability bonds, funds from which can be used more widely for social investment. This includes developing skilled workers to work in the construction industry. These issues have expanded our field for fundraising as we appeal to investors with ESG concerns. We held several ESG engagements with shareholders and institutional investors in FY2019.3. In the future, we will more proactively disclose ESG information, led by the ESG & SDGs Department newly established in January 2019.

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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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