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Last updated: May 8, 2008
| (FY2008 forecast for new construction housing starts) |
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What is your forecast for new construction housing starts in FY2008? |
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In FY2007, with the effects of the revised Construction Code we expect the final tally for construction to reach 1.05 million units. In FY2008, despite the lessening of the effects of the construction code revision, we expect new construction housing starts demand in Japan to be stagnant, and construction to reach 1.10 million units, which is about 10% less than FY2006 levels.
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| (FY2008 foreign exchange assumptions) |
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What are your foreign exchange assumptions for FY2008? |
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Our internal assumptions are 108 for the yen/US dollar for the first half, 100 for this rate in the second half, and 104 for the full term. Our full term assumption for the euro is 159 yen per euro. Gains or losses from differences between our assumptions and actual rates are booked in non-operating income. In FY2008 we expect the yen to rise to 100 yen per US dollar, and we have incorporated a corresponding non-operating loss into our plan.
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(FY2008 UIEP Company sales price forecast)
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For your FY2008 operating income target in the Urban Infrastructure & Environmental Products (UIEP) Company, what is the likelihood of raising your prices?
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We have announced our intention to raise PVC pipe prices 15-20% from April. Negotiations with customers are ongoing, so we cannot comment on what will happen. We believe however that we will be successful in meeting our target of 3.1 billion yen in higher sales due to price increases.
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(FY2008 Housing Company materials cost forecast)
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For your FY2008 operating income target in the Housing Company, your assumptions for materials cost increases appear to be small; how much do expect steel prices to rise?
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We use about 100,000 tons of steel per year, and a price increase of 20,000 yen/ton will subtract about 2.0 billion yen from our earnings. Price negotiations are ongoing so our forecast is unclear at present, but we are hedging price increases through cost reductions in other areas and by other means.
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(FY2008 housing orders plan breakdown)
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Your FY2008 plan calls for 2% higher order volume year on year for housing on a monetary amount basis. What is the breakdown of this for units, price and living environment business sales?
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We expect unit orders to be up 3% in the first half, 2% in the second half, and 2% for the full term. For price, we will launch many new products aimed at first time buyers, and as such we expect prices to fall 1% for the full term. We expect the living environment business to contribute 1% growth for the full term. In total, we expect 2% growth in monetary amount order volume.
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(Basis for FY2008 housing order prices)
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With the launch of products for which customers can feel high cost performance, sales of lower priced items will grow. You only expect however FY2008 price per unit in the Housing Company to fall 1%. What is the price range for the Crescasa and bj new products, aimed at first time buyers? Can you give us numerical figures?
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Our bj product, aimed at first time buyers has grown into a core product with sales of 3,500 units per year. With the updated product bj new, we aim for bj series sales of 4,000 units per year. Average price for bj series products is 26 million yen.
For rebuilding demand, we will continue efforts as before, but looking at the market environment we expect demand in our traditional target customer group to remain dull. To capture demand in the price zone where there is more movement, we are launching high value for the price products such as bj new and Grand Two-U WS. As a result, we are seeing our overall average price falling. On the other hand, our specialized sales structure in the Tokyo, Nagoya, and Kinki areas has produced strong sales of apartment housing, which carries a higher price than detached houses. Also, sales of options such as Warm Airy, an under-the-floor heating system are firm. These factors are offsetting the price fall, and we expect overall unit prices to fall only 1%.
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(Reasons for FY2007 living environment business profit growth and FY2008 forecast)
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What was the reason for the large year on year operating income growth in FY2007 in the living environment business? Also, what is the reason for the somewhat slower growth forecasted for FY2008?
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In FY2007, sales of key high-margin materials grew, and overall margin improved 1.1% year on year. Also, restructuring of our living environment business structure in the Tokyo, Nagoya and Osaka areas lowered fixed costs. As such, operating income grew markedly over FY2006.
In FY2008, fixed costs will be higher due to staff we transferred into the unit in FY2007 and an additional 50 employees we plan to transfer in FY2008. As a result, we expect profit growth to be somewhat slower in FY2008.
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(Details of FY2008 business restructuring in the HPP Company)
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On p.36 of your materials you discuss restructuring in the High Performance Plastics (HPP) Company. Looking at your sales plan for FY2008 (by business unit and by operating income margin), your improvement targets for businesses with operating income margin of "less than 5%" and "5-10%" are large compared with FY2007 improvement results. What is the reason for the larger targets?
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The graphs on page 36 are separated in 5% increments and it is difficult to assess the extent of improvements within each category. Restructuring in each business unit is progressing however, and overall HPP Company operating income margin is improving. The "less than 5%" category in FY2007 results included businesses where margins have improved to just under 5%, and we plan to make further improvements in FY2008. The same is true in the 5-10% category.
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Will the operating income margin improvements be due to price increases more than cost reductions?
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In FY2007, 60% of basic materials cost increases was transferred to overall HPP Company product prices, and in FY2008 we expect 80% of cost increases to be transferred. For the operating income margin improvements we expect in FY2008, while it is not true for all business units necessarily, the price increases will contribute more than cost reductions in comparison with FY2007 results. However, an even larger factor for the FY2008 plan is unit volume increases.
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Disclaimer
This press release may contain forward-looking statements. Such forward-looking statements are based on current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements due to changes in global economic, business, competitive market and regulatory factors.
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