full Annual Report 2003(5.9

2
Message from the Management
Rokuro Ishikawa
Chairman
Operating Environment
Japanese domestic demand remained subdued overall throughout fiscal 2003
(ended March 31, 2003), as persistent deflation and steadily deteriorating job
markets kept personal consumption and business investment in check. Business
confidence suffered amid deflationary spirals involving falling land and stock prices.
Concern over a stalling U.S. economy added to the uncertainty, further clouding the
economic outlook.
In the Japanese construction market, private domestic demand for construction
services continued to slide, most notably in the manufacturing sector. Public-sector
demand also fell, as fiscal consolidation induced central and local governments to
rein in public works spending.
Geopolitical risks constrained overseas markets in the latter half of the period, preventing
the economies of the U.S. and Europe from achieving a robust recovery.
Results
Unable to completely avoid the negative influence of these market conditions, the
Kajima Group on a consolidated basis recorded mixed results for fiscal 2003.
Revenues fell 9.0% from the previous term to ¥1,874.8 billion, primarily due to a
decrease in the total construction revenues of the Company and its consolidated
companies in Japan and overseas.
These shrinking construction revenues and a less favorable gross profit margin
combined to bring gross profit down 9.6% year on year. As a result, operating
income declined 14.2% to ¥36.3 billion. Consolidated net income bounced back to
¥10.1 billion, after a loss of ¥41.2 billion in the previous fiscal year, when the Group
booked a large loss to restructure its asset holdings.
A New Medium-Term Business Plan
To achieve sustained growth and development into the future, the Kajima Group
has been aggressively pursuing a medium-term business plan, known as the Next
Three-Year Plan, which was formulated in fiscal 2002. However, the rapid changes
in the business environment surrounding the Group, including the shrinking construction
market and the deepening of deflationary trends in Japan, have significantly
exceeded the assumptions made when the plan was drafted early in 2001.