Fudo Tetra Corporation

Fluctuations in the scale of government construction investment or in priority investment areas, as well as changes in the content and timing of orders from government and local public bodies, may affect the Group's business results. The Group primarily targets the development and maintenance of social infrastructure and is highly dependent on public investment trends. In response, the Group conducts research on demand trends and works to expand market share, while also expanding its business domain by entering new markets such as the "maintenance and repair" field, in addition to "disaster prevention and mitigation."

The declining birthrate and aging population are causing a serious decrease in the working population in the construction industry, and if a sufficient workforce cannot be secured, business activities may be hindered, affecting performance. The Group is working to secure, retain, and prevent the turnover of personnel by strengthening new graduate and mid-career hiring, promoting work-style reforms, and enhancing systems to accommodate diverse work styles. In parallel, each business division is also addressing the labor shortage through the development and promotion of ICT utilization.

A sharp rise in the prices of construction materials, labor costs, and other items may increase construction costs, and if this cannot be reflected in contract prices, it may affect business results. Amid recent surges in material prices, the risk that difficulty in passing on costs will squeeze profitability has been increasing. In response, the procurement department is involved from the order review and construction planning stages to ensure stable procurement at appropriate purchase prices.

Depending on the order form, more than 50% of contracting parties are private construction companies, and if these companies experience credit concerns leading to delayed collection of receivables or bad debts, this may affect business results. There is also a risk that credit concerns at partner subcontractors or joint construction companies could delay construction progress, or result in uncollected investment receivables or debt burdens from joint venture members. In response, the Group conducts ongoing collection of credit information, thorough internal review using credit research agencies, and, as necessary, secures guarantees on receivables.

If the Group is subject to substantial claims for damages due to non-conformity with contracts or other liability related to construction works or products, this may affect business results. The Group pursues continuous improvement at each stage—sales, design, procurement, and construction—through its quality management system, and thoroughly manages quality on-site based on work manuals specific to each construction method. In addition, the internal audit department conducts audits as appropriate to help prevent the occurrence of contract non-conformities.

In the event of a financial crisis or sharp market fluctuations leading to deteriorating business performance, the Group may face difficulties in raising funds or an increase in fundraising costs, which may affect business results. Foreign exchange fluctuation risk arising from overseas transactions may also affect business results. In response, the Group secures liquidity on hand through multi-year commitment line agreements and reduces risk through forward foreign exchange contracts and other measures as necessary.

The Group operates mainly in Southeast Asia and the United States, and significant changes in local political and economic conditions or laws and regulations, as well as the occurrence of war, conflict, or terrorism, may affect business results. When receiving orders for construction in high-risk countries or regions, the Group conducts advance risk assessment and analysis. After receiving an order, the Group prepares for emergencies in accordance with its overseas crisis management manual, including outsourcing to crisis management companies and introducing overseas safety confirmation systems.

Construction sites, due to the mixed presence of personnel and machinery from various companies, have a higher incidence of accidents and disasters compared to other industries, and if a serious accident or disaster occurs, it may lead to work stoppages, administrative sanctions such as suspension of designation by ordering government agencies, and a decline in social reputation, all of which may affect business results. The safety department leads regular safety and health activities, including safety weeks, safety and health conventions, and inspection tours by head office executives. The Group continuously conducts safety and health education and awareness activities from an employee's early career stage to prevent the occurrence of accidents and disasters.

The transition to a decarbonized society may lead to restrictions on business activities and increased costs due to greenhouse gas emission regulations and the introduction of carbon taxes, and the physical impacts of climate change, such as more frequent and severe weather-related disasters, may also affect business activities. The Group has set a target of achieving net-zero CO2 emissions by 2050 and is working on the development of CO2 reduction technologies, the construction and modification of environmentally friendly vessels, fuel-efficient operation, and the adoption of energy-saving equipment. In February 2023, the Group announced its support for the TCFD and discloses its response to climate change issues in accordance with TCFD recommendations.

The Group is subject to numerous legal regulations, including the Construction Business Act and the Industrial Safety and Health Act, and changes in laws, the enactment of new laws, changes in applicable standards, or occurrences of violations of laws and regulations may affect business results. Relevant departments monitor trends in legal amendments, formulate response policies in advance, and establish and periodically review various guidelines and manuals. The Group has established a system for the early detection and correction of violations of laws and regulations through enhanced compliance systems, ongoing training sessions, and the establishment of a corporate ethics helpline with an external contact point.