Feature｜The Kanamoto Way -1

Please take a brief look back at the past year.

Since the Great East Japan Earthquake, the entire company has continuously moved forward to assist restoration and recovery in the disaster-stricken regions. Specifically, after opening an office last year in Kesennuma City in Miyagi Prefecture, we followed up by establishing offices in Miyako City and Kamaishi City in Iwate Prefecture. We sought to strengthen our response capabilities by shifting the focus of our personnel, rental assets and other management resources.
We also established branches in Maebashi City in Gunma Prefecture and Hiroshima South in Minami-ku in Hiroshima City, Hiroshima Prefecture, two regions that were not devastated by the disaster. In addition, to enhance and expand the foundation of our domestic business we added Unite Co., Ltd., which has strengths in every facet of road works and boasts excellent name awareness and results in the industry, to the Group in June of 2012. This brought the number of our domestic branches on a consolidated basis to 319, and we believe this has enabled Kanamoto to broaden the scope of its business and greatly improve our solution functions as a group.
In November of last year we exhibited as a group at BAUMA China, the global construction equipment trade fair, which was held in Shanghai. We exhibited the foundation and ground improvement equipment line-up from KG Flowtechno Co., Ltd., one of Kanamoto's subsidiaries, and were able to showcase the superiority of that technology's capabilities to the world.

Last year Kanamoto reported strong operating results. How do you see the future business climate shaping up?

I think it's fair to say that because of the large increase in construction investment by the government under its large supplemental budget, together with the growing demand for maintenance and repairs for Japan's aging infrastructure and the fact private sector construction demand is steady, particularly for energy-related needs, the immediate business environment will remain brisk. By firmly meeting such demand we will continue to achieve operating results that exceed those shown in our Medium-term Management Plan.
At some point, however, the day will come when restoration demand winds down, so we must look firmly at our exit strategy at that time. Some of the steps we are considering include a shift of the rental assets and employees currently concentrated in the Tohoku region to other areas of Japan or overseas, the expansion of our business areas, and improvements to our business efficiency.

What about capital investment?

For the fiscal year ended October 2012, total capital investment in rental assets exceeded ¥21.0 billion, marking the second consecutive business period of increases. We are planning ambitious capital investment for this fiscal year as well.

What are Kanamoto's plans for expansion of its domestic branch network in the future?

To strengthen our capacity to support full-scale earthquake disaster recovery, we are proceeding with plans to establish several new branches in the disaster-stricken areas in the future. We also will proceed to aggressively strengthen our domestic business base in areas that were not stricken by the disaster, with priority on metropolitan areas and on regions that currently do not have any Kanamoto branches. We will position M&A as a growth engine for the Kanamoto Group in the future as well, in addition to establishing branches, and we intend to pursue this activity aggressively while comprehensively verifying the results.

Please tell us a little about Kanamoto's overseas expansion.

With regard to the countries where we are already developing bases, in China we are responding to the economic slowdown, while in Hong Kong and Singapore we will proceed with aggressive expansion of our operations. We also are looking into the development of bases in new regions, particularly in Southeast Asian countries. Let me add that although we have positioned the expansion of revenue and earnings opportunities in the newly developing countries of Southeast Asia, which will achieve remarkable development in the future as well, as one of the important measures that will determine the future of the Kanamoto Group, we are cognizant of the country risk and latent exchange rate and investment recovery risks, and we will pursue the creation of a solid business base while keeping the early recovery of invested capital firmly in mind.

Are there any sectors in which Kanamoto will focus its efforts on development in terms of sales?

We will continue to undertake business development that is firmly rooted in each region. To attract project works that are based on the strengthening of our relationships with general contractors that have the capacity to expand, and to address demand in the foundation and ground improvement sector and the roadway-related maintenance works sector, where the Kanamoto Group possesses particular strengths, we will respond through all of the group's firms.

What measures is the company pursuing from aspects other than sales?

We consider our construction equipment management system to be the fount of our earnings. Because providing customers with construction equipment that has been scrupulously maintained is of primary importance, we will move to upgrade and equalize our maintenance standards.
Another effort we have launched is our "business improvement project," which will thoroughly analyze current business processes and undertake improvements designed to enhance profit and loss management and strengthen our competitiveness. Our objective is to maximize the operating earnings from our rental assets and improve our turnover rates.
Because we have added more than 100 new employees for two consecutive years, we are enhancing our training systems and will cultivate employees who possess the abilities to support Kanamoto's domestic sales and overseas development.

As a final topic, please share your thoughts as an individual and managing director.

In October 2014, Kanamoto will celebrate the 50th anniversary of its founding. Of course, achieving our Medium-term Plan objectives of consolidated revenues of ¥101.3 billion and operating income of ¥8.0 billion for the Business Period ending October 2014 (Kanamoto's 50th Business Period) will be important. But I think that laying the foundation to enable the Kanamoto Group to develop over 100 years, including both the years leading up to the company's fiftieth anniversary and the next 50 years, make this a vitally important period. So I've renewed my determination to help create a solid organization during this period and build a firm capable of continually fulfilling its social mission.