Urban Infrastructure & Environmental Products Company
President of Urban Infrastructure & Environmental Products Company
At a Glance
|The fundamental businesses of the Urban Infrastructure & Environmental Products Company mainly deals in the water infrastructure facilities, such as water supply and drain pipes, and the manufacture and sale of construction materials. The UIEP Company is focusing on leveraging the technology cultivated from its fundamental businesses to develop and expand its overseas business operations in areas ranging from pipeline renewal, sheet used for high-performance plastic molds, industrial piping materials, and glass-reinforced plastic pipe for infrastructure applications. The UIEP Company’s pipeline renewal and other highly effective technologies are readily applicable to infrastructure upgrade projects in developed countries. Consequently, we are embarking on full-fledged overseas expansion, as we actively conduct M&As in related business fields.
|Primary Business Products||Main Products and Brand Names|
PVC pipes and joints, Polyethylene pipes and joints, Plumbing systems, Reinforced compound plastic pipes, etc.
Pipeline renewalMaterials, equipment and installation methods for pipeline renewal
SPR Method™, Omega-Liner Method™, Pipe Line Diagnostic System
Industrial piping materialsPipe materials for factory production equipment (valves, pipes, joints, etc.)
Building materials and housing equipmentConstruction materials (rain gutters, flooring materials, etc.), Insulation material, Bathroom units
ESLON™ rain gutters
Performance materialsSheets for aircraft interiors, Sheets for vehicle interiors & exteriors, Fiber-reinforced foamed urethane (FFU)
KYDEX™, ALLEN™, ESLON™ Neo Lumber FFU (Railway orbital sleeper)
Note: The previous fi scal year results encompassed the 15-month period from January 1, 2012, to March 31, 2013, owing to the revision to the overseas subsidiaries’ accounting period effected in fi scal year 2012. Overseas subsidiary earnings in the January–March 2012 quarter included net sales of ¥4.9 billion and an operating loss of ¥0.7 billion.
The Urban Infrastructure & Environmental Products (UIEP) Company is the leading supplier of resin pipe products in Japan with operations centering on water infrastructure facilities, such as water supply and drain pipes, and the manufacture and sale of construction materials.
The UIEP Company’s success in the resin pipe business is the result of know-how accumulated over 50 years of domestic business activities and it is applying this know-how to actively advance the development of its overseas businesses through its pipeline renewal products; glass reinforced plastic pipes; various piping products including valves and other industrial piping materials; and performance materials, such as sheet material for aircraft and fiber-reinforced foamed urethane for railway applications.
The UIEP Company is fully aware of the inevitable repercussions that the declining population in Japan will have on housing and construction starts and is seeking to expand sales by leveraging its accumulated brand power and sales strength and by reformulating the business model and broadening the business domain for its domestic core businesses centered on its resin pipes and other mainstay products.
Specifically, the company is seeking to eliminate its dependence on sales of single product items and transition to a business model that will enable full application of its comprehensive business strength for system sales, combined-product “package” orders, and other integrated products. The company is maximizing the utilization of the company’s resources and aggressively fortifying partnerships in areas where the company’s resources are limited with the aim of creating an operating structure that will enable it to compete at its full strength.
In this way, the UIEP Company is preparing for the expected temporary spikes in domestic demand, including new housing starts from the anticipated surge in demand ahead of the consumption tax increase and post-earthquake reconstruction-related demand, as well as for the fundamental gradual ebbing of demand.
The company is currently advancing a strategic transformation to position for earnings growth in the medium and long-term. In Japan, the company is revising the business model of its domestic core businesses to focus on package product and systems sales. In its overseas businesses, the company is applying its technologies cultivated in Japan and other strengths to meet needs in countries where demand is expected to grow.
Results for Fiscal Year 2012
Net sales: Increase of 14.5 billion yen to 214.5 billion yen
Operating income: Decrease of 1.2 billion yen to 1.8 billion yen
The UIEP Company fell short of its earnings targets in fiscal year 2012. The targets were set in anticipation of reconstruction demand and a large supplementary budget in Japan during the year, but demand never gained momentum as reconstruction demand failed to emerge and is now expected in fiscal year 2013 or later and the supplementary budget was not ratified until the end of the fiscal year in March.
Despite the harsh business conditions, the company steadily advanced measures to strengthen the business structure of the domestic core businesses through business integration and business model reform aimed at fortifying the earning capability for the medium and long-term. The overseas business environment was also severe, including deteriorating profit in the pipeline renewal business due to stagnancy in the European market.
A key step to fortifying the domestic core businesses during the year was the acquisition of the piping materials operations of Mitsubishi Plastics, Inc. Acquiring the operations, centered on the PVC piping business, will fortify the company’s earning power with the increased trading volume boosting negotiating power when procuring production materials and scale merit improving production and distribution cost efficiency. In addition, consolidation of the PVC pipe industry will alleviate the excessively competitive conditions in the shrinking domestic market.
In addition, the domestic core businesses began to show results from efforts to eliminate the dependence on single product sales and transition to a business model for expanding earnings by applying its comprehensive business strength in system sales, “package” orders, and other integrated products.
In the value chain business, which will be a key to future earnings growth, expansion of the business to reach further upstream and downstream enabled the company to raise sales by 7.3 billion yen in fiscal year 2012 compared to fiscal year 2010.
Progress was also made in positioning the company to offer comprehensive project proposals in the factory, housing, public facilities, and other business domains through deepened partnerships and other measure.
In addition, efforts to attract combined-product package orders by leveraging the company’s overall strength generated an order backlog 20.0 billion yen higher than in fiscal year 2010.
As fiscal year 2013 approached, signs began to appear of an upturn in the demand environment, such as for housing and construction spending. Overseas businesses showed improving earnings in the United States, Asia, China, and other areas but were late to respond to the overall deteriorating market environment accompanying the stagnant economic conditions in Europe.
Earnings deteriorated for the pipeline renewal business in Europe owing to falling project prices amid intensifying competition and growing ad debts, particularly in the Western European markets. On top of this, sales did not grow as much as planned in Eastern Europe, which offers promising new markets, due to delays in acquiring standards certification for the company’s proprietary construction methods. The overall result was the UIEP Company recording a 14.5 billion yen year-on-year increase in net sales to 214.5 billion yen in fiscal year 2012.
The UIEP Company’s operating income from Japan operations increased 0.7 billion yen year on year. Despite the impacts in Japan from the slow emergence of reconstruction-related demand and the late enforcement of the supplementary budget, positive factors including increased volume, lower raw material expenses, and cost cutting effects outpaced the negative factors including falling product prices in the intensified competition and higher fixed costs.
Overseas profits declined 1.9 billion yen year on year, primarily due to the reduced volume from the sluggish pipeline renewal business. The revised fiscal years of overseas subsidiaries and new consolidations strongly impacted profits and erased the positive effect from reductions to fixed costs.
In fiscal year 2012, the UIEP Company made steady progress fortifying the business foundation and revising the business model of the domestic businesses, but sluggish pipeline renewal business results due mainly to the stagnancy in the European market held operating income at 1.8 billion yen.
Fiscal Year 2013 Plan
Net sales: Increase of 22.5 billion yen to 237.0 billion yen
Operating income: Increase of 5.2 billion yen to 7.0 billion yen
In fiscal year 2013, the company plans to bring the reform launched in fiscal year 2011 to completion. To that end, the company will continue developing and fully activating the value chain business during the year. At the same time, the company plans to aggressively pursue domestic private and public demand to full advantage of the upswing in demand cycles.
We also plan to improve earnings overseas as we reestablish the European operations. Through these measures, we intend to regain the profit growth track and ensure continuing growth going forward.
We expect demand to remain generally strong in areas related to the UIEP Company’s domestic businesses. We anticipate increasing public investment and emerging reconstruction activity to boost demand for the pipeline renewal business and government projects, such as for public facility construction, and expand the market by 20% or more from the previous fiscal year. We also expect domestic private demand to rise year on year in every sector, including the housing sector from the demand surge ahead of the consumption tax increase, the construction sector on increasing demand for seismic upgrades and other structural improvements, and the plant sector on a boost from tax incentives.
The outlook for the overseas businesses varies depending on the region and sector. In Europe, we expect demand to continue firm in Eastern Europe while persisting severe conditions in Western Europe hold demand flat year on year. In the United States, we expect improving capital investment to support a general recovery in demand and also see signs of a recovery in infrastructure-related demand. In the emerging markets of Asia, we anticipate ongoing growth in infrastructure-related demand in fiscal year 2013.
Sales and Income Targets
In fiscal year 2013, we plan to increase earnings in the domestic business by steadily capturing the anticipated rises in both government and private demand and also to raise earnings in the overseas business by reestablishing the pipeline renewal business in Europe.
We plan to raise domestic business operating income by 2.7 billion yen. We expect business volume to grow on boosts from both government demand with the enforcement of the 15-month supplementary budget and the surfacing of reconstruction demand and from private demand as a surge in pre-tax hike demand accelerates new housing construction starts. We will also raise our product prices as a hedge against rising raw material prices and implement cost reductions to help offset a rise in fixed costs.
We plan to raise overseas business operating income by 2.5 billion yen. The key elements are the boosts from increased business volume, reduced fixed costs, foreign exchange effects, and contributions from newly consolidated companies.
The forecast includes 1.3 billion yen that should be attainable from management efforts excluding the foreign exchange effect, contributions from newly consolidated companies, and the impact from the revision to the fiscal year periods of overseas subsidiaries. We believe this combined with the forecasts for growth in the sheet business in the brisk U.S. market and the water infrastructure business in China along with lower fixed costs and other benefits from the restructuring of the pipeline renewal business in Europe will give us sufficient momentum to achieve the target.
Through these efforts, the UIEP Company is targeting operating income of 7.0 billion yen in fiscal year 2013.
Fiscal Year 2013 Initiatives
Management initiatives in fiscal year 2013 will focus in the domestic business on accelerating the growth of the stock business and establishing a firm foundation for the general products business and in the overseas business on reestablishing the European business and implementing new mechanisms for growth.
In the domestic business, accelerating the growth of the stock business will entail increasing orders in the pipeline renewal business along with full entry into the water supply and transportation fields to progress away from single product sales to systems and package sales. In the condominium field, we plan to bolster performance results by offering comprehensive proposals for large-scale reforms and renovation projects and attracting orders and commencing projects from our stock of post-earthquake reconstruction projects as we direct all our powers toward transforming to a business model for earnings growth.
To establish a firm foundation for the general products business, we will implement a comprehensive streamlining of operations by reorganizing the production systems including the piping materials business acquired from Mitsubishi Plastics, Inc. and use our leading domestic distribution channels to expand orders. We will also take steps to construct a profit structure in preparation for the anticipated declining trend in housing construction starts in the medium and long-term.
In the overseas business, we will move to quickly reestablish the pipeline renewal business in Europe. Measures begun last year, including overhauling the construction management system and reorganizing the Western Europe business operation system, will be advanced to completion, and management will aim to increase orders by focusing strategies on Northern Germany, where the company has its strongest presence, and Eastern Europe, where demand is strong. These efforts will further advance our initiatives to improve European business earnings and prepare the overseas business for new growth.
In the United States, we will continue consolidating the pipeline renewal business to improve efficiency and expand orders while implementing measures in the sheet business to further stimulate the synergies between the two companies. In other regions, we will step up our business specialization in the public water supply business in China and promote full-fledged development of the infrastructure market in Asia.