moved ahead of other construction companies in ordering work vessels. We will gain an advantage as a pioneer in this field in Japan. In the future, we also plan to become involved in new marine construction projects such as laying direct current transmission lines and pursuing carbon dioxide capture and storage (CCS), while looking to expand our presence overseas. After 2030, we aim to cultivate activities in new markets and build a third pillar of operations with operating profit of about ¥10 billion.For the Toyo Construction Group to realize stated goals such as “solving social issues through business activities” and “enhancing the business foundation,” we organized issues of materiality according to Environmental, Social, and Governance (ESG) factors and defined key performance indicators (KPIs) that will serve as guideposts along our business activity path. To advance related initiatives, we must re-examine the meaning of sustainability management from a corporate perspective. My view is that the value a company provides goes beyond economic and social value to include environmental value. A company has an obligation to view society and our planet as stakeholders and create value with these stakeholders in mind. But creating social and environmental value does not come from volunteer activities or community service projects alone. I accept it as true that social and environmental value should evolve within the context of corporate activities that generate economic value. You could also say economic value that cannot create social or environmental value will not last. From a social value perspective, we seek to leverage exceptional expertise and know-how in constructing key components of social infrastructure such as port facilities and airports, thereby improving the social foundation that underpins the safety and security of citizens. In addition, we contribute to solving social issues through concerted efforts to develop technology that supports disaster prevention and mitigation measures and strategies to strengthen national resilience to natural disasters. In the wake of the Great Hanshin-Awaji Earthquake and the Great East Japan Earthquake, Toyo Construction took a full-effort, whole-company approach to support the speedy recovery of affected areas. We are also involved in activities targeting full-scale recovery of areas affected by the 2024 Noto Peninsula Earthquake. These efforts showcase our commitment to improving social infrastructure and fulfilling our social responsibility to protect people’s lives and their property. From an environmental value perspective, our participation in the offshore wind power construction business presents huge value-driving potential. The self-propelled, cable-laying vessel we are having built is designed with the environment in TOYO CONSTRUCTION I INTEGRATED REPORT 2024 Promoting sustainability managementMessage from Executive Chairperson & CEObuoyed by defense-related construction projects in line with Japan’s national defense strategy and further complemented by the government’s “Five-Year Acceleration Plan for Disaster Prevention, Disaster Mitigation, and Building National Resilience.” In the private sector, we expect a significant increase in carbon neutral-related projects, paralleling the GX (Green Transformation) trend, with a particular emphasis on constructing offshore wind power generation facilities, laying direct current transmission lines, and building hydrogen and ammonia supply chain facilities. Although the industry is grappling with chronic labor shortages due to the aforementioned “2024 Problem,” I believe Toyo Construction can move forward while maintaining high profit margins by carefully approaching profitability management and wisely selecting projects to undertake. But in the long term, changes in Japan’s demographic structure will surely impact the construction industry, and we have to be alert to such changes and their consequences. Changes impact a labor-intensive business like construction not only on the demand side but also on the supply side. That is an unavoidable fact. Therefore, we will utilize DX and AI to boost work efficiency and productivity, and further reinforce efforts overseas, especially in the Philippines, where population growth is expected.Our earnings structure has the advantage of a stable earnings base supported by a long track record and advanced technological capabilities. Our business foundation comprises two key building blocks: the civil engineering business, notable in that 80% of sales come from public works, and the building construction business, which has a stable customer base and a high rate of repeat business. Both segments boast operating profit margins exceeding the industry average and maintain high profitability.In the overseas construction business, a process of selection and concentration has put the Philippines in the spotlight. Our track record in the Philippines is built on a presence spanning more than 50 years, earning us a solid reputation in the local market. Outstanding name recognition gives us a competitive advantage over our rivals. Looking to the future, we aim to expand our client base from Japanese, European, and U.S. companies to blue-chip local companies, which will underpin significant sales growth.In addition, the market for offshore wind power construction, which is likely to be a central part of the national GX strategy, has recently emerged and is expected to become a new revenue base for the Group. There are risks such as the possibility that the power providers’ operations may not begin as initially scheduled. For our part, though, we have narrowed our business focus to laying subsea cables and have already Diverse business opportunities at home and abroad14
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