Chapter 2 Top Message

Chapter 2Top Message

Top Message
Business Models
Growth Strategy

The infrastructure*1 that underpins our daily lives and the foundations of society isfacing issues that could jeopardize safety and comfort in many locales. Society canno longer function simply by continuing to build and maintain infrastructure as inthe past, so the idea of infrastructure itself stands at a crossroads.
Recognizing such issues, MAEDA CORPORATION (MAEDA CORP.), MAEDA ROAD
CONSTRUCTION Co., Ltd., and MAEDA SEISAKUSHO CO., LTD., in October 2021
established a joint holding company—INFRONEER Holdings Inc.—to support andtake up the challenge of infrastructure services*2. Approaches that go beyond
preconceived notions will be needed to address the major issue of how to maintainand sustain the infrastructure on which our social foundations rest, and one
approach to achieving this is “de-construction.”
To become the integrated infrastructure service company we aspire to be, wewill change our own mindset and work styles and continue to grow as a company
while constantly transforming ourselves.

Value Creation Story

Continuing to Be a Reformer in theInfrastructure Business andTaking On the Challenge of Building aSustainable Society as an Integrated
Infrastructure Service Company

Sustainability

Kazunari Kibe

Joined MAEDA CORPORATION in 1986; served as a Managing
Officer in 2014; served as a Director and General Manager ofthe Management Innovation Division from 2016; in October
2021, became the Director, Representative Executive Officer,President, and CEO of INFRONEER Holdings.

15Corporate Data

Director, Representative Executive Officer,President, and CEO
INFRONEER Holdings Inc.

16

Chapter 2 Top Message

https://www.infroneer.com/pdf/en/company/topblog/kibelog_en_vol9.pdf

For example, it means that the INFRONEER Group will
not only be involved in construction contracting but alsoacquire the rights to operate social infrastructure, suchas airports and water supply and sewage systems, andtoll roads, and handle the entire infrastructure life cycle,
including construction, operation, maintenance, andmanagement.
The infrastructure business involves business risks andsometimes large investments but, by leveraging theengineering capabilities*4 and financial expertise wehave cultivated, we can minimize risks and generatelarge returns.
This is where I envision the future of the INFRONEERGroup. It is not just about changing the way we do business itself. It entails changing the way we think and work
as a company.
As the “construction” business requires us to build tothe specifications demanded by the client, there is notmuch room for exercising our own imagination. If we aregoing to pursue “de-construction” and take risks in ourbusiness, we need to switch to a “de-construction”
mindset that lets us properly communicate our opinions
to the client from the standpoint of a business partner,
and work together to build robust infrastructure.
I believe that we will consequently be able to realize thevision of the INFRONEER Group as an integrated infrastructure service company.
For more details on our business model, see page 21.

To achieve our envisioned organization, we have formulated key measures for each strategy with productivity reforms, establishing a newrevenue base, and strengthening and improving our corporate culture as the three pillars of our strategy.

Required elements

Three strategic pillars

Profitability

Growth Strategy

Three Strategic Pillars and Important Measures

Envisioned organization

Business Models

We in the infrastructure business have always asked
ourselves what genuine value we can provide to society,and one of the conclusions we have reached is the ideaof “de - construction.” MAEDA CORP. has made“de-construction” a pillar of its management strategy
for the past 10 years.
“Construction” is a type of contract arrangement inwhich a contractor promises to complete a project andis paid by the commissioning entity for the outcome ofthe work. In the construction industry, this means thatthe client places an order for construction work, and thecontractor receiving the order—the main contractor—
brings together specialized construction companies toguarantee the completion of the construction work forthe client.
The symbolic term “de-construction” as used by theINFRONEER Group does not mean that we do not engage
in the “construction” business; instead, it indicates that
we are not bound by, and are actively going beyond, theconventional business model of “construction.”“De-construction” also implies that the INFRONEERGroup is willing to take on the business risk of projects.

Important measures
Maximizing added value
Optimizing fixed expenses andadministrative costs● Promoting Group financial strategy●Productivity reforms
Rationalization
Efficiency●Sustainability

Establishing a position at home
and abroad in infrastructureservices*2● Further expanding business areas●

Strengthened
Group power

Establishing a
new revenue baseCreditworthiness
Reliability

Promptness

Strengthening andimproving corporate
culturePromoting a Group humanresources strategy● Strengthening governance●Corporate Data

Ability to respondto social changes

To bolster our internal structures in support of these
initiatives and to develop DX talents, we are also in theprocess of reforming our personnel system to ensure it
will motivate employees to take on new challenges. In
financial terms, we will continue investing in humancapital to further increase added value. We place theutmost importance on enhancing our added value as aF
 or details of our medium- to long-term business plan, see page 37 orvisit our IR information website at:https://www.infroneer.com/en/ir/

Thoughts and Resolve Underlying“Construction x De-construction”

Establishing a new revenue basethat is highly profitable and stable

To realize the integrated infrastructure services that theINFRONEER Group is aiming for, we must be firmly
committed to transcending the construction industry’s
conventional wisdom and promote digital transformation (DX) to revolutionize the entire industry and evenindustries with which we have had no previous association. We must continue making a variety of efforts toraise citizens’ awareness of infrastructure as an asset forsociety as a whole.

As an integrated infrastructure service company, wewill pursue a growth strategy of both maximizing added
value throughout infrastructure lifecycles and value
chains and maintaining and expanding our own revenue
base by integrating all aspects of the infrastructure
lifecycle, encompassing planning, proposal, construction,operation, and maintenance. In addition to growing ourown and our partner companies’ core businesses, wewill actively engage in M&A and alliances to expand ouroverall scope of business.

For details on our human resources strategy, see pages 43 and 55.

Earning the trust by all our stakeholders

Achieving Integrated
Infrastructure Services

It is also imperative to keep pace with our dramaticallychanging digital society, as exemplified by the emergenceof Chat-GPT, a generative AI that has been the focus ofmuch attention lately. In Japan, where the birthrate is
declining and the population is aging rapidly, DX is aprerequisite for companies to survive in terms ofimproving labor productivity and increasing added value.
I believe the essence of DX lies in the “X (transformation),”necessitating rule changes using digital technology.
In a concession*3 project, the public entity retains
ownership of the facility while the private operator
assumes the right to operate the facility. Data-driven
operation and maintenance management are importantin this regard as well. This approach should prove
effective for all social and public infrastructures thatINFRONEER is involved in operating, such as airports,
water supply and sewage systems, exhibition halls, andarenas.
If we can achieve “X” in operating, maintaining, andmanaging infrastructure, the benefits will spread toexisting businesses, leading to the expansion of ourbusiness domain and the creation of a new revenue base.
At the root of our various challenges is INFRONEER’s
unwavering commitment to resolving the issues faced
by Japan’s infrastructure. With the establishment ofINFRONEER Holdings, we announced our strategy forputting this commitment into practice in our INFRONEER
Vision 2030, a medium- to long-term business plan thathas three strategic pillars: productivity reforms, establishing a new revenue base, and strengthening andimproving our corporate culture. The INFRONEER Groupwill continue to do what has always been important to it
and, as a means of attaining these, we are expanding theareas we have been working on, taking on the challengesof “de-construction,” and creating added value for localcommunities.

For details on capital recycling, see page 23.

17F or details on our DX strategy, see page 43.
For information on TEKKON, see page 38 or visit our website at:company by investing in human resources as much as in
R&D for future business growth.

Top Message

Our goal as an integrated infrastructure service company
is to provide comprehensive and efficient services totowns, cities, and society as a whole by expanding ourbusiness into various infrastructure sectors such asroads, airports, and water supply and sewage systems,
and by engaging in multiple sectors through combined
endeavors by our subsidiaries, alliance companies, andbusiness partners. The infrastructure that supportssociety remains an integral part of people’s lives overextended periods of time. For example, bridges androads will continue to be used for 20 to 30 years after
they are built, thus requiring periodic inspection andmaintenance.
We no longer live in a high economic growth period
where new infrastructure is being built up continuously,
so we need to focus instead on maintaining the value ofexisting infrastructure.
We need to provide good services in the eyes of thepublic whilst making our business profitable over thelong term to maintain our corporate operations.
Infrastructure is an asset belonging to the nation asa whole that supports society over the long term, andwe believe it is a good match for pension funds andother entities that invest from a long-term perspective.
To improve capital efficiency, it is necessary to undertake
capital recycling, in which owned and operated infrastructure is transferred to a pension fund and otherfinancial institutions that cannot take on construction
risk to recover the invested capital so that ultimately
we as a company can suitably enjoy profits while
increasing the capital of society as a whole.

One of the new challenges we have taken up with ourpartners is the TEKKON co-creation initiative. In 2023,
we invested a total of ¥2 billion in the Whole Earth
Foundation (headquartered in Singapore), which developed the popular-participatory TEKKON data collection
app. The establishment of a new company to provide
infrastructure management services utilizing variousinfrastructure data collected by the Foundation is alsopart of our DX transformation vision for integrated infrastructure services.

Value Creation Story

What We Aim for as an IntegratedInfrastructure Service Company

18

Chapter 2 Top Message

Comparison of “Construction” and “De-construction”
Operating profit configuration(FY2022)2.0%

3.2% 5.4%
5.3%
4.2%

34.3%
21.4%

22.0%

20.0%

30.4%

9.6%

42.0%

Net sales: ¥709.6 bil.

■ Building construction:■ Civil engineering:■ Road civil engineering:¥215.5 bil.

¥152.0 bil.
¥243.7 bil.

Operating profit: ¥■ Building construction:■ Civil engineering:■ Road civil engineering:¥8.9 bil.

¥17.0 bil.

INFRONEER’s Concept of Corporate Value¥3.9 bil.

¥37.3 bil.

■ Machinery:■ Infrastructure management: ¥22.5 bil.
■ Related businesses:¥38.6 bil.

■ Infrastructure management: ¥8.1 bil.*■ Related businesses:■ Machinery:F or details of VMV, see page 1. For stock benefit trust (J-ESOP),
see page 38.

40.5 bil.

¥1.7 bil.
¥0.8 bil.

Out-of-the-box Change of Mindset

For *1 to *5, refer to the glossary on page 64.

Corporate Data

To create synergy, we are also reforming our internalsystems and our approach to allocating human resources.
To foster employees’ sense of identification and unity
with the Group as well as to motivate employees toimprove our stock price and our Group’s performance,
we hold workshops to disseminate INFRONEER’s VMV(Vision, Mission, Value) philosophy and its Group-wideroadmap (action agenda) and working to foster a corporate culture and improve engagement.
We have also introduced a stock benefit trust (J-ESOP)
as an incentive plan that provides shares to all Group
employees as well as contract employees and others
who meet certain requirements. Approximately 8,000
persons are expected to be eligible for participation inthis plan.
In addition to providing performance-linked sharesbesides current compensation, the program also grants
points for childbirth and other benefits. The purpose ofthis is to give employees a sense of participation in the
management of the company, particularly in themanagement of the INFRONEER Holdings Group as awhole. We will be providing detailed explanations toemployees in the future, and we hope this program will
provide additional motivation for our employees toimprove our performance.
Additionally, we try to mix employees from the threebusiness companies as much as possible across divisions and companies to emphasize diversity when
launching new projects. The percentage of female
employees in the construction industry is still low. AtSustainability

19F or details of dialogues with stakeholders, see page 25.

Growth Strategy

Our business performance since the establishment ofINFRONEER Holdings has been in line with or exceeded
expectations. Even in the face of significant negative
market changes, such as soaring crude oil prices and theweakening of the yen against other currencies, our business has generally proceeded as expected. For morethan a decade now, our Group has been working out
ways through our business activities to avoid gettingcaught up in price competition within the constructionindustry. We believe that our Group’s concerted efforts
to produce better infrastructure while generating
adequate profits as a company are bearing fruit. While
there is a clear divide between companies with favorable and unfavorable performance within the constructionindustry, our Group is one of the few companies that havebeen able to advance their business according to plan.
The INFRONEER Group is a group of three listedcompanies, and we were concerned when transitioning
to a holding company structure that there would be
adverse effects both vertically and horizontally on theways we conduct business and work. In general, themore a company pursues its own interests and convenience, the more likely it is to be vertically divided, while“authoritarian” companies tend to be horizontally divided. However, there was no need to worry about this.
Numerous employees have been working hard to eliminate these negative effects. Since the founding ofINFRONEER Holdings, we have been bolstering ourorganizational structure to eliminate information
inequalities throughout the Group and to enable each

In FY2022, I visited 13 offices across Japan twice to hold town meetings, engaging
with approximately 7,000 employees over a period of 26 days.

Our results for FY2022 (the fiscal year ended March 31,2023), the first full-year financial results since theestablishment of INFRONEER Holdings, show that bothsales and profits increased year on year and that net
income reached a record high (compared with MAEDA
CORP.’s consolidated profit). On the whole, all segments
performed well, and we expect further increases in sales
and profits in FY2023.
The integrated report plays a major role in carefully
explaining our management indicators, the introductionof IFRS into our financial strategy, and the concept ofreturn on invested capital (ROIC) so that our stakeholders can better understand the steps we are taking toenhance our corporate value.
I have been exchanging views with numerous investors
both in Japan and overseas through investor relations(IR) endeavors since the latter half of the 1990s. I learned
at our most recent IR meeting overseas that there wasgreat interest in our integrated report, giving me an opportunity to reaffirm the importance of disclosing information
through the integrated report and other means.
Going ahead, we intend to further augment our venues
for information disclosure and engagement, seek theopinions of investors and external stakeholders as wellas Group employees, and find the best ways of realizing
and manifesting these opinions.
We are committed to engaging more than ever withinvestors and enhancing our corporate value to help
reinforce their optimism about the future of theINFRONEER Group. We look forward to your continued
support and encouragement.

Business Models* Operating profit ratio between “construction”
and “de-construction”
Target for FY2030: 50:50
Result of FY2022: 80:20

Generally speaking, corporate value (approximated bymarket capitalization) is the present value of the cash
flow that a company will generate in the future discountedby the cost of capital. It is my belief that the satisfactionof all stakeholders will lead to medium- to long-term
improvements in corporate value (as measured by marketcapitalization). I think that sustainability management
improves stakeholder satisfaction and contributes tohigher corporate value. With the increasing emphasis on
ESG (environment, social, and governance) factors, it isimperative to focus on the global environment, humanresources, and human rights in our business activities. As
such, we will further accelerate our investment in thesesustainable initiatives.
In terms of our governance structure, we have adopted
a “Company with Nominating Committee” system. Thisis because a sophisticated governance system thatemphasizes the monitoring function of supervising business execution is indispensable for the INFRONEERGroup, which is looking to enter a new domain as anintegrated infrastructure service company. We believethat enhancing the effectiveness of this governancesystem is the key factor to increase corporate value inthe future.
Overseas strategies also play an important part inincreasing corporate value. The adoption of International
Financial Reporting Standards (IFRS) from FY2023 isintended to ensure that accounting standards do not
become a hindrance in the pursuit of a business modelthat can be used globally in the future. IFRS-based
financial statements will enable us to compare ourselveswith other companies in the same industry around theworld. We can also expect smooth post-merger integration when merging and acquiring companies from overseas. We believe the adoption of IFRS will be highly
beneficial in realizing our vision of “A world where
there’s no limit to what can be asked from and what canbe delivered by infrastructure services*5.”

To Our Investors

Top Message* Configuration ratios are rounded to the second decimal place.

INFRONEER Holdings on a non-consolidated basis,
however, we are boosting the percentage to approximately 30%. Also, we have been promoting younger
employees. Going forward, we seek to promote suchinitiatives throughout the Group to change our corporate
culture and conventional thinking.
Our challenge is to create a business model that isuncharted in the Japanese construction industry. It is
important to change our mindset in a way that transcends preconceived notions and goes beyond conventional ways of doing things while striking a balance
between freedom and discipline. I believe this is the firststep toward increasing our corporate value.

Value Creation Story

Sales configuration(FY2022)

employee to work with a sense of ownership and independence by, for example, live-streaming management
meetings for all employees to see and making theminutes of Board of Directors meetings available. We
have also held town meetings for executives andmid-level employees of our business companies. Ratherthan simply providing one-way explanations of thedirection INFRONEER Holdings seeks to take and of
specific achievements, these meetings are intended toencourage communication and stimulate growththroughout the Group by enabling two-way exchangesof opinions. We hope these efforts will help create
further synergies.

20