Important Notice
June 09, 2006 Earnings Announcement Press Conference
Conference Summary
(Chairman)
Hello everyone. Thank you for taking the time to join us today.
Today, I will first provide an overview of our financial results, after which Mr. Beppu, the Managing Member of the Board of Directors in charge of accounting, who is also here with us, will answer any questions you may have.
At our Board of Member of the Board of Directors meeting held today, we resolved to hold our first general shareholders' meeting on June 27th and to send a convocation notice to shareholders. There are two important decisions made today. The first is the financial results overview, and the second is the selection of executive officers.
First, I will explain the overview of our financial results.
The financial statements that we have distributed to you have been reported to us by our accounting auditors and Audit & Supervisory Board Member to be accurate.
Our company took over the business from the former Japan Highway Public Corporation and started as a new company on October 1st of last year. This financial statement is the first for our company to compile a half-year financial statement.
I will give you an explanation based on the materials for the first-term financial results we are giving out, but before that, I would like you to understand the nature of the first-term financial results. I would like to make two points.
The first point is that this settlement of accounts covers the half year from October 1, last year.
The other point was that the period of this settlement was legally based on the provisional agreement. It was the preparation period until the conclusion of this agreement as a new company, and the preparation period for formulating a business plan as a full-scale joint stock company this year.
In that sense, this financial statement has the character of the financial statements of the second half of the former public corporation. Please listen to the explanation after understanding them.
Let's start with the income statement. Please listen while referring to pages 1 to 3 of the document.
Regarding the business results for the current term, ordinary income for the current term was a surplus of 23.5 billion yen. Income before income taxes was 23.7 billion yen, and after tax it was 11.9 billion yen. After making some technical adjustments, unappropriated retained earnings were 12.5 billion yen.
I would like to describe this by segment.
The operating income of the Expressway business is a surplus of 19.9 billion yen. In the related businesses, operating income is 2.7 billion yen.
The surplus is about 11 billion yen for Expressway about 1.4 billion yen for related businesses. There are some differences when rounded off, but the total is 12.5 billion yen.
There are 3 pages of materials on how to dispose of this surplus.
Basically, this 12.5 billion yen remains as surplus.
This settlement is during the preparation period. Management as a full-fledged private company begins in April of this year. In that sense, we will not touch on the surplus under the provisional agreement during this preparation period.
Expressway will be fully repaid in 45 years. This is legally required. It is a segment that needs to be considered a 45-year settlement. So that, Expressway about 110 billion yen came in, in the sense that prepare for the future of the redemption plan, Expressway I would like to reserves as a business reserve. It means that we will not touch it as a profit disposal.
Similarly, in the related businesses, it was April 1 of this year that the assets were taken over from the foundation in earnest. Full-scale management will start on April 1. As such, we recognize that this 1.4 billion yen-to be exact, 1,482 million yen-is the amount that the shareholders added to the capital. Therefore, I think it is important to make shareholders' equity even thicker for future management. That's why I recorded it as a separate reserve fund without any modification.
As a result, the profit for the next period will be 0. From April 1st, on a zero basis, but in a favorable situation where stockholders' equity is thicker, we have started to make full-scale efforts to realize our business plan.
The above is a general explanation of our business results for the current fiscal year.
As a result, we were able to avoid financial statements that would have seriously damaged shareholders' equity, which we initially thought we had to avoid. However, I do not think that I should be discouraged, and I think I should keep three things in mind.
The first point is that you shouldn't be optimistic that you've made some profit in the first period.
Even in the last 10 or 15 years, there have been times when the fee income has changed significantly. Due to economic conditions, disasters, etc., the fee income will surely vary. Fortunately, in the second half of the year, traffic volume was higher than expected, and toll revenue was only 3% upward. In the past, it was sometimes more than 10% downward. Similarly, there is a big upward blur.
But we have to make sure that it will be redeemed in 45 years. I have such an obligation. When the new company was launched, I promised that to all the people. Don't be optimistic that you've made some semi-annual profits this time around. Don't worry about it. I think so.
Our point of view is to fully redeem in 45 years. For the next 45 years, it may shake upward or downward. Do not be discouraged here and dispose of profits. This time I made 100%. I believe that the basic stance should continue to be that way of thinking.
The second thing is the same thing, but with the current financial results, I think it would be a problem if you think that you can achieve your business plan if you keep going.
We must make further efforts to reduce and reduce expenses, streamline, and maximize operating revenue. It would be a problem for me to think that if I could continue this fiscal year, I would be able to complete my fiscal year.
I don't know what will happen for the next 45 years. Many things have happened in the past. The average interest rate that is the basis for the redemption plan is 4%, but will this interest rate be fulfilled? This is a fairly conservative estimate, so I think it will be within the range of 4%, but I think that this is beyond the range that humans can predict. Therefore, we must continue to make every possible effort and further strengthen it. If we have the tendency to think that “we were able to achieve the expense plan in the second half of the year. We were able to achieve the operating income above the target. With this, no further efforts are needed.” I think this is our defeat. Therefore, this is just a preparation period, and we keep ourselves in mind that it is a grace period given to us by our shareholders, and we will make every effort to further reduce costs, improve management efficiency, and maximize operating revenue. I have to go. This is the second point to keep in mind.
The third is the point to keep in mind about B / S that I will talk about.
First of all, please see page 4 for B / S. Balance sheet. The total assets are about 800 billion yen. Although it is a company with fairly large total assets, what can be said characteristically in terms of assets is that the ratio of current assets is extremely high, and conversely, the ratio of fixed assets is relatively small. . Fixed 2 for flow 6. One of the main reasons for the large amount of current assets is work in progress assets, which is 339 billion yen, which accounts for more than half of current assets. This is the work-in-progress asset of the Expressway that we are currently constructing, and is an asset item that is transferred to the holding and debt repayment mechanism each time it is completed. In that sense, it is recorded in the current assets section. As a result, the asset mix is in the form of 6 current assets and 2 fixed assets.
I would like to take a look at creditors, but one thing that can be said characteristically in terms of liabilities is that the ratio of current liabilities is relatively small. Fixed liabilities plus shareholders 'equity are 6 fixed liabilities plus shareholders' equity, compared to 2 current liabilities. One more thing to keep in mind here.
Certainly, the fixed ratio is small in terms of assets, and the current liabilities are small in terms of liabilities. However, this does not mean that we should allow capital to be fixed. It may not be a big deal in terms of money, but I think there is still room for liquidation in some fixed assets. Therefore, except for land, buildings, and other fixed assets that we must have for our business, we must continue to make efforts to liquidize as much liquid assets as possible.
In terms of capital, shareholders' equity happened to have accumulated about 12.5 billion as a result of this financial statement, which is added to the 130 billion yen received from shareholders as capital and capital reserve. As you can see from the announcement of Challenge V, we need to make various investments for the future.
In addition, for road construction, it will be necessary to raise funds without relying on government guarantees for the next 15 years. In Challenge V, we declare that we want the government guarantee to be zero within five years. In that sense, I think it is necessary to make further efforts to never damage shareholders 'equity, to do as little as possible to the reserve fund this time, and to increase shareholders' equity by accumulating surplus. I will. I think we shouldn't be cautious in such a direction just because some results came out in the first fiscal period for 6 months. That is the third point to keep in mind.
Next, I would like to talk about the appointment of officers. Please refer to the handout I distributed regarding the appointment of officers.
At today's Member of the Board of Directors meeting, we decided on the candidates for Member of the Board of Directors and Audit & Supervisory Board Member to be proposed at the Ordinary General Meeting of Shareholders. The names are written here. There are five candidates for Member of the Board of Directors and four candidates Audit & Supervisory Board Member.
There are two new appointees.
Mr. Yano Hironori is a candidate for Member of the Board of Directors. Please refer to the brief resume I have distributed. He joined Toshiba in 1963. In 1999, he became the Nikkeiren (Japan Business Federation), and after the merger of Nikkeiren and Keidanren, he served as Executive Director of Keidanren until the end of last month. As announced by the Minister of Land, Infrastructure, Transport and Tourism the other day, Mr. Yano Hironori is a candidate for Chairman. I will be stepping down at the General Shareholders Meeting on the 27th, so Mr. Yano will be my successor.
The other new candidate for Audit & Supervisory Board Member Member is Mr. Takashi Nishiyama. For a brief biography, please refer to the handout provided. He joined Toyota Motor Corporation in 1965, and was appointed Managing Member of the Board of Directors of Tokai Rika Denki Seisakusho in 1998. He is currently Senior Member of the Board of Directors of the same company. It is my understanding that he will be stepping down as Senior Member of the Board of Directors of Tokai Rika Denki at the upcoming general shareholders' meeting.
As a result, we will have two full-time and two part-time Audit & Supervisory Board Member. As you know, under the new Companies Act, the roles of Audit & Supervisory Board Member and Audit & Supervisory Board Member have become extremely important. Therefore, we would like to ask Mr. Nishiyama to serve as both an outside Audit & Supervisory Board Member and a full-time Audit & Supervisory Board Member, which is why we are adding new candidates.
I've only talked about this, and I'll answer any further questions.
(Moderator)
So if you have any questions, please feel free to contact us.
(Reporter)
Regarding the personnel affairs of the chairman this time, it may be a matter of national approval, but I think that I decided on my own whether to leave or leave the office. I would like to ask you to explain the background of that.
(Chairman)
That is exactly what the Minister of Land, Infrastructure, Transport and Tourism told me.
At this point, we are in the informal stage, and we want to do our best to fulfill our current position until the shareholders' meeting is decided. When the official decision was made at the general meeting of shareholders, I plan to replace my successor, Mr. Yano, and I would like to hold a press conference with Mr. Yano.
Therefore, I would like to think more about the answers beyond the end of the general meeting of shareholders.
(Reporter)
Is there any work that you have left over and left behind, including the days of the Highway Public Corporation? I think there were some rigging issues, but I would appreciate if you include that as well.
(Chairman)
I would like to talk about this again if necessary at the press conference on the 27th that I just mentioned, as you know, the conclusion of this agreement, the management plan from the new fiscal year, and the one pointed out now There were many measures to prevent misconduct such as rigging and what to do during the preparation period. I think we have laid the foundation for steady execution.
However, the management of the new company is just beginning. In that sense, I made a few supplementary notes about the points that the company should keep in mind when explaining the financial results. With this in mind, I would like all of us to work together as one with a long-term perspective, without forgetting our original intentions.
(Reporter)
Regarding the personnel affairs of the executive, you said at the press conference on 27th, but please tell me your candid impressions about being retired at this point and what will you do after you retire? Please let me know if you have any plans to use another position.
(Chairman)
First of all, I would like to talk about the current impression, but the Minister of Land, Infrastructure, Transport and Tourism has explained the background of his retirement. I am currently in the informal stage, and as I mentioned earlier, there is something I still have to do until 27th. I would like to do my best with all my strength.
I'm not thinking about anything after retirement and haven't decided anything yet. Maybe I should talk after the general meeting of shareholders, but I personally feel like it's a little rest. Either way, I haven't thought about anything, and I haven't decided anything.
(Reporter)
I have just retired within a few months of the full-scale start under this agreement. Why did you, as the chairperson himself, decide to retire before the end of the first term of this agreement?
As for the other point, please tell us what you expect from the new chairman and what do you want most now?
(Chairman)
The first question is as I have answered so far. Just as the Minister of Land, Infrastructure, Transport and Tourism told me.
I would like to pass on various things to the new chairman. Especially for the past 6 months, the preparations related to this agreement that came during the preparation period, the process of creating Challenge V, and the implementation status of 24 items for preventing misconduct. And I think we'll be able to announce this soon, but we've almost finished analyzing the bid results for the past six months. I think we need to make further improvements. With that in mind, I would like to firmly convey to my successor chairman my concerns about the financial results for the first term that I mentioned earlier.
(Reporter)
There are two points. One is the informal stage, but regarding this timing, did the chairperson himself have been anticipating or thinking of this timing for a long time?
The other is the reform that I mentioned earlier, and there was talk of rigging, but I would like to ask an actual example that you are feeling as a concrete measure.
(Chairman)
First of all, I would like to ask you about the timing, but I think the Minister of Land, Infrastructure and Transport is also talking about this. That was the case from the beginning.
Since becoming a new company, it is also possible to implement 24 items of measures against fraudulent acts such as rigging, conclude this agreement, formulate Challenge V, and adopt the new personnel system as a private company that we reported to everyone. We are making steady progress, including. I think that the framework of management as a new company and a private company was almost set up on April 1, and as we report every month on the prevention of rigging and other misconduct, the numbers are fairly We are now in a situation where we can be confident that we have secured competitiveness.
But in all respects, including awareness reform, it is still halfway. As a public corporation to date, it has a long tradition and customs as part of the administrative body. In that sense, I think it would be terrible to expect 100% consciousness reform. I think that the direction of consciousness reform along with the framework has been established, but it is still too early to make good things to date. Halfway through, I think there is a lot to be done, and that kind of recognition is needed.
(Moderator)
Now Kondo will leave.
(Chairman)
Thank you for your cooperation.
Beppu, who is in charge of accounting, will remain, so please ask again if necessary. Thank you very much.
(Executive)
I'm Beppu. Then please.
(Reporter)
I'll ask three points.
First, I think that ordinary profit is significantly higher than originally announced in the fall. The paper here also gives a brief explanation, saying that the economy is recovering, but I would like to know what kind of background lies here.
The second point is the Expressway business, which is supposed to make no profit. The chairman told you that it will be accumulated for the future, but are you not thinking of giving back to the user as another option or reducing the price, such a realistic thing?
Lastly, I think that the financial statements this time are non-consolidated, but I wonder if there are plans to issue consolidated financial statements including family companies. If not, what do you think from the perspective of disclosure?
Please answer about these three points.
(Executive)
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All of these were pointed out questions, and maybe they should have been explained from here, but I just answered a question, so I will answer.
As you mentioned, the Expressway business generated a large ordinary profit. As you understand the scheme, the plan fee income minus the planned road management cost is the lease fee and Expressway rent paid to JHF. This rent was decided by a provisional agreement, and then we have been watching the changes in rent income for 6 months. In December, heavy snowfall caused a drop in traffic, and I was wondering if I could secure the toll income as planned. The fee income exceeded. Due to the growth in traffic volume, toll revenue has exceeded the plan by almost 3%. This is a major factor that made us profitable this time.
If we add one more, we assumed that the penetration rate of ETC would reach around 70% in the second half of the year. I was anticipating that if you go up to about 70%, the discount associated with the use of ETC will be considerable. Unexpectedly, it stopped at a little less than 60%, so there is a reduction in spending for the discount. The mileage also behaved in a fairly large format, but it did not come out as planned, so the fee income first exceeded the plan.
On the other hand, road maintenance costs were also related to heavy snow measures, and I was worried that it might exceed the planned costs until around December. However, the result was that the cost was lower than planned.
The toll revenue exceeded the plan and the road management cost fell below the plan. As a result, such operating profit came out of the Expressway business.Second, I think that if you made such a big profit against the scheme that the Expressway business does not make a profit, would you like to give back to the user? I will.
As Kondo earlier, it is basically 45 years of financial settlement. Immediately returning with temporary profits Nudon will hinder reliable redemption, so if you look at the transition for several years and the outlook becomes clear to some extent, that kind of thing will be talked about. I wonder if it is.Third, as you pointed out, this year's financial results were announced separately. We plan to announce additional consolidated financial results during the summer, but the figures for fiscal 2005 will remain almost unchanged on a non-consolidated basis. This is because we established a 100% subsidiary of SA, Nakanihon Exis, in December, but we did not operate at all in the second half of this year, and we have begun operations from April. There is almost no impact of consolidation.
Then, regarding the problem of consolidation of family companies, which are so-called maintenance contractors, I considered it from various angles as a new company. I reviewed again from all angles whether the subcontractor who did not invest is really a subsidiary of the Company, or whether it is in control. As a result, we decided that we are not a subsidiary or an affiliated company that exercises significant influence because we do not see the fact that we control it from anywhere, and we also talked to the accounting auditors. As a result, we have decided not to consolidate in the second half.
However, so-called family company information disclosure is a very important request from society, so we will not consolidate it, but the family company information disclosure will not step back. I want to move forward even a little. Therefore, it will be summer, but we will continue to provide information on outsourcing companies in the same way as in the past, or in a way that is a little easier to understand.
(Reporter)
Does it mean that the next summer's financial results will be announced on a consolidated basis?
(Executive)
We are announcing consolidation, but we are only consolidating a very small amount of expenses when EXIS is not in operation yet. So-called family companies are not consolidated, so in terms of numbers, there is almost no difference from the independent settlement explained today.
And apart from that story, we will continue to disclose the information of outsourced parties, the outline of B / S and P / L by company, etc. with the cooperation of the outsourced party as usual.
(Moderator)
If you have no other questions, this concludes the financial press conference. Thank you very much.