[Feature] Towards completion of our new long-term vision "BULL55" - 2

New Long-term Vision “BULL55”
[1. Domestic]

To help grasp the operating environment surrounding the Kanamoto Group, the following report looks at the domestic and overseas construction demand expected to receive short-term, concentrated investment in the future.

Construction demand and railway development in the Tokyo metropolitan area set to intensify

Infrastructure development ahead of the 2020 Tokyo Olympics and Paralympic Games

With projects to build the competition sites for the 2020 Tokyo Olympics and Paralympic Games already underway, full-fledged development of the transportation infrastructure to support this event has begun. In addition to the plan to open a new line linking central Tokyo and Haneda Airport, plans are moving forward for a new station between the Shinagawa and Tamachi stations on the Yamanote Line and Keihin Tohoku Line, which will be timed to open for service with the start of the Olympic Games. Development plans for the three ring roads that will be the key to improving transportation efficiency in the Tokyo metropolitan area, including the Tokyo-Gaikan Expressway (Tokyo Outer Ring Road) targeted for completion by about 2020, and the Ken-O Expressway (Metropolitan Inter-City Expressway) that will promote traffic moving between each expressway, are moving forward as well.

Road and railway overpass projects

There are about 1,050 railroad crossings in Tokyo, and many are a major cause of traffic congestion. Therefore, as one aspect of road improvement, projects to alleviate the congestion caused by railway crossings and improve urban functions and convenience, including “continuous grade separation projects” to continuously elevate railways or relocate them underground to completely eliminate many railroad crossings at once, and “single grade separation projects” to elevate individual roads onto overpasses or place railways on overpasses along relatively short intervals, are being carried out one by one.

Source:Prepared based on materials from the Ministry of Land, Infrastructure, Transport and Tourism, Kanto Regional Development Bureau

Shinkansen network improvement projects advancing in various regions

As maintenance on the railways that serve as Japan’s “transportation axis” heats up, maintenance works and Shinkansen line extension projects are being undertaken in various locales. The Hokkaido Shinkansen, which opened for service between Shin-Hakodate-Hokuto and Shin-Aomori in March 2016, is proceeding with construction work on the interval between Shin-Hakodate-Hokuto and Sapporo with the aim of opening for traffic in FY2030. On the Hokuriku Shinkansen, construction has begun on the Kanazawa-Tsuruga interval scheduled to open in FY2022, and the West Kyushu Route (Nagasaki Route) of the Kyushu Shinkansen also is aiming to begin operations in FY2022.

Work finally begins on the Linear Chuo Shinkansen

Work on the large-scale “Linear Chuo Shinkansen” project, set to open between Shinagawa and Nagoya in 2027, has finally begun. The total construction cost is estimated at 5,523.5 billion yen. Tunnel intervals will account for 246.6km or about 86% of the entire length of 285.6km, and full-scale construction has already started at Shinagawa Station and on the Southern Alps tunnel in Yamanashi Prefecture.
In August 2016, Kanamoto launched its Specialized Equipment Engineering Division and established a Tunnel Machinery Section and Water Treatment Machinery Section in the same division, and is working to strengthen its organization to be able to respond in all directions in cooperation with group companies to the increased work on the new Shinkansen projects in the future, the Linear Chuo Shinkansen, and tunnel-related construction works on each main line route.

Large-scale renovation including expressways and bridges is moving ahead

Infrastructure development for disaster prevention and disaster mitigation

Public awareness of disaster prevention and disaster mitigation, influenced by the frequent occurrence in recent years of catastrophes such as the Great East Japan Earthquake and the Kumamoto Earthquake, has been gradually rising. As shown in the table below, with expressway renewal plans moving forward, the three NEXCO companies will spend about 3 trillion yen, and the Shuto Expressway and Hanshin Expressway are both large-scale projects as well, with a total expenditure of approximately 1.0 trillion yen. In addition to these projects, infrastructure at 700,000 locations throughout Japan, including bridges, tunnels, dams, railways, harbors, and airports, will need to be renovated during the years from 2010 to the 2030s.
Given these circumstances, a public works plan for development and repair of infrastructure throughout Japan is already being implemented based on the “Basic Plan for Extending the Lifespan of Infrastructure” that is part of the “National Resilience” program formulated by the government to fund expenditures of 200 trillion yen.
The Kanamoto Group will work to maintain the safety of Japan, by actively pursuing development of products for infrastructure maintenance and repair and new products based on advanced technologies, and introducing products registered in NETIS* (New Technical Information Provision System).
*Technical information database accumulated based on the Ministry of Land, Infrastructure, Transport and Tourism’s System for Application of Technology in Public Works Etc.

New Long-term Vision “BULL55”
[2. Overseas]

Infrastructure demand in growing ASEAN countries

Large projects in four newly advancing countries as well

Infrastructure construction projects in Asian countries are being carried out vigorously against the backdrop of rapid economic growth and urbanization. In addition to the branches it had already opened in Shanghai, Hong Kong, and Singapore, during the past two years the Kanamoto Group established new joint venture
companies in Indonesia, Vietnam, Thailand, and the Philippines.
In Indonesia, the government currently is implementing a “National Medium Term Development Plan” to drive infrastructure investment with funding equivalent to 44 trillion yen during the five-year period from 2015 through 2019, focusing on electric power, ports, shipping, roads, and housing as priority sectors. Whether it is Lach Huyen Port infrastructure development or sewer and drainage system construction in Vietnam, works such as double-tracking of national railway lines or the urban rail transit and expressway network construction being planned for the Bangkok metropolitan area in Thailand, or the road map for implementing infrastructure development with a value of seven trillion yen by 2030 that has been approved in the Philippines, vigorous construction demand can also be anticipated in the four countries where the Kanamoto Group has opened its newest bases.
In the future, we will strive to develop business related to the expansion of infrastructure demand in ASEAN countries, while maintaining and expanding each company’s operating results and deepening cooperation with each overseas partner company.

New Long-term Vision “BULL55”
[3. Internal]

Optimization of internal operational processes that will serve as the “basis of earnings”

Improvement of utilization rates and profit margins through system improvements

Rental revenues are determined by multiplying asset quantities by rental unit prices and utilization ratios. At Kanamoto, we believe greater efficiency of construction equipment management and operations form the basis of the Kanamoto Group’s earnings, and recognize improvement of the utilization ratio through “optimization of internal operational processes” to be a critical issue.
Improvement of our current systems is indispensable for improving the utilization ratio. As a first step, we are changing the machine codes for each existing rental product from the plates and stickers presently used to IC tags and QR codes, and have begun using dedicated readers and communication circuits to scan the identification information recorded there and utilize the data for equipment deliveries and pickups and for warehouse and inventory management.
We also are integrating Group company systems. As a result, the Kanamoto Group will be able to minimize the differences in utilization ratios between slow periods and peak demand seasons, achieve relative improvement in utilization ratios and raise rental revenues, and improve profit margins by realizing a permanent cost reduction.

Enhancement of information systems to boost operating efficiency

The Company was an industry pioneer in creating an online network in 1985 linking all its branches. In 2004, we completed the migration of all mission-critical systems from a mainframe to an open system and realized greater efficiency in all of our internal operations, from managing our rental asset inventory to performing maintenance and regular inspections, accounting treatment and credit management, plus the selection of models for next-period introduction.
Providing “the right equipment” at “the right time” and in “the right quantity” can be said to be the foundation of equipment rentals, and Kanamoto’s online system makes it possible. Not only does our online system ensure smooth equipment delivery and pickup, it contributes significantly to the formation of a product lineup that meets customers’ needs.
Kanamoto will continue its efforts to develop “IT governance,” and work to further increase the efficiency of internal operations, while aggressively pursuing the development of proprietary systems in the future.