The Housing Company has established a unique position in Japan in new housing construction as a specialist in the Unit Construction Method, an advanced factory-built approach that enables short construction periods and delivers functions in accordance with design plans.
Responding to the increasingly sophisticated needs of customers, the Housing business has moved high-performance housing forward, guided by the concepts of environment, reliability, and comfort. It was in particular an early mover in housing with solar-power generation systems, going back to 1997 when it first scaled up such initiatives, and its cumulative sales of such residences exceeded 180,000 units as of the end of Fiscal 2016.
The company achieved another milestone in April 2012 with the release of its Smart Heim models with standard features such as built-in storage batteries and the Smart Heim Navi Home Energy Management System (HEMS).
In the Renovation business, it draws on the features of its factory-built housing products and its database of the housing stock it has constructed to offer renovation proposals best suited to the life stage of each homeowner.
In the Frontier (Domestic) business, we are also developing our management of existing home sales, leasing and management, and other housing asset management operations as well as the construction and operation of housing with support services for senior citizens. In addition, the company is expanding its new construction housing operation overseas.
In fiscal 2017, the Housing Company reported a second consecutive fiscal year of sales and profit growth. Net sales in the fiscal year under review came to ¥497.8 billion, an increase of ¥12.8 billion compared with the previous fiscal year. From a profit perspective, operating income totaled ¥37.9 billion, up ¥0.4 billion year on year. Despite this second consecutive fiscal year of sales and profit growth, the operating income ratio remained essentially unchanged at 7.6%. This was largely due to such factors as the slump in the renovation business.
Looking at the status of sales by specific business, results were mixed. While the housing and frontier businesses, which focus mainly on newly built houses, recorded an increase in sales, sales declined in the renovation business.
On the earnings front, the housing business secured an increase in operating income. Despite the upswing in costs and in particular the price of steel, a mainstay material which continued to hover at a high level, this improvement in operating income reflected such factors as the increase in the number of houses sold and successful efforts to reduce fixed costs including promotional expense. Meanwhile, profit declined in the renovation business. The main factor for this decline was the downturn in sales attributable to the slump in orders.
Reflecting on the Housing Company’s performance by business, the housing business saw an increase in the number of houses sold on the back of the previous period’s order backlog. Moreover, orders for GRAND TO YOU V, which the Housing Company began marketing from fiscal 2017, were robust mainly from first-home buyers. New housing starts in Japan declined for the first time in three years. This negative turnaround was most prominent for privately-owned housing, which came in at just above 280,000, a decrease of 3.3% compared with the previous fiscal year. Despite these difficult conditions, orders in the housing business climbed 1% year on year. Looking at a breakdown of orders, detached housing grew 3% while apartments declined 17%.
In the renovation business, steps were taken to reinforce designs and increase the number of designers based on a proposal-type sales concept. Against the backdrop of a harsh operating environment however, orders declined compared with both forecasts at the beginning of the period as well as the previous fiscal year. In fiscal 2018, energies will be directed toward reviewing the structure and systems in order to achieve an increase in profit.
Activities in the domestic and overseas frontier businesses for the most part progressed in line with plans.
The housing market is expected to experience a period of modest renewed energy in fiscal 2018 due mainly to the rush in demand in the leadup to the planned consumption tax rate hike in October 2019. Against this backdrop, the Housing Company is targeting growth in newly built housing orders and increases in both sales and profit. Net sales are projected to reach ¥516 billion and operating income ¥39.5 billion for a third consecutive fiscal year of sales and profit growth. At the same time, the Housing Company will focus on securing an order backlog as of the end of fiscal 2018 that is capable of generating a substantial upswing in profit in fiscal 2019.
On this basis, the Housing Company is targeting an increase in overall net sales. In specific terms, the goals are to ensure sales growth in the housing and frontier businesses with sales in the renovation business on par with the previous fiscal year. From a profit perspective, the Housing Company plans to offset the anticipated upswing in fixed costs attributable to efforts aimed at increasing the number of personnel in the housing business as well as such negative factors as the projected sharp rise in material costs including timber by increasing the number of houses sold. Against the expectation that sales in the renovation business will remain unchanged from the previous fiscal year, every effort will be made to curtail fixed costs in order to boost profit.
The market for newly built houses is a mainstay field of the Housing Company. In fiscal 2018, this market is expected to experience a modest increase in demand, especially in the urban sector, from the second half prior to the consumption tax rate hike. The housing business will place particular emphasis on increasing orders by definitely capturing a part of this increased demand.
From a product strategy perspective, the Housing Company will continue to rely on contributions from the three products released in fiscal 2017 which helped to boost orders. At the same time, every effort will be made to release a succession of new steel-frame products in fiscal 2018 and to enhance the Company’s product development capabilities. In addition, the Housing Company will continue to strengthen its Company-owned land and subdivision housing activities. As of April 2018, in the housing business, steps are being taken to increase its sales force by 5% compared with the previous fiscal year.
In addition to strengthening products and the Company’s sales force, every effort will be made to control fixed costs in the renovation business in fiscal 2018. In addition to concentrating on expanding sales of strategic products, emphasis will be placed on increasing the efficiency of indirect functions in order to return to an upward trend in profit. On top of strategic products, the Housing Company will bolster conventional maintenance and other products. The Company will work to rebuild its business model in a bid to place its renovation business on a profit growth trajectory from fiscal 2019 and beyond.
In its frontier businesses, where the Housing Company focuses on real estate, the focus will also be on boosting profit by increasing the number of dwelling units under management and expanding the circulation of secondhand housing. As far as the Company’s overseas business in Thailand, which experienced a temporary market contraction, is concerned, 180 houses are projected to be sold on the back of a recovery in orders at the start of 2018.
Based on the fusion of our knowledge of unit housing accumulated over more than 50 years with advanced zero energy housing, we are providing homes that are friendly to the global environment and in which people can continue to live comfortably and with peace of mind for more than 60 years.
In the housing business that represents our business activities, we aim to increase market share in the three largest metropolitan areas where we have a relatively low market share while simultaneously implementing cost innovation that leverages the appeal of the Unit Construction Method.
In addition, we will promote Frontier Pioneering, such as in real estate, residential services and overseas business activities.