A Message from the President

Operational Results

During fiscal 1999, ended March 31, 1999, the Japanese economy continued to languish in a prolonged recession. Despite sweeping government economic measures, corporate profits fell and employment worsened due to a decline in private-sector demand triggered by weak consumer spending and a sharp drop in capital investment. In the construction industry, government measures to increase public investment were ineffective in offsetting the slump in private demand amid a downturnn in private capital investment, a drop in housing construction and restricted capital investment of electric power companies. Orders and earnings continued meet with extreme pressure owing the price declines accompanying the shrinking construction market. The depressed operating environment showed no signs of improvement. Amid these conditions, TOSHIBA PLANT KENSETSU Co., Ltd. Prioritized efforts o improve profits by securing orders and implementing Companywide cost reductions. Despite these efforts, orders were down 4.5% to ¥136,193 million (US$1,129.8 million) on account of decreases in Nuclear Power Plants despite orders for large-scale projects overseas. Non-consolidated net sales edged down 4.4 % to ¥113,919 million (US$945.0 million). Confronted by a decline in sales and falling prices, the Company recorded a net loss in the first half of the fiscal year. Owing the improvements in the operating income margin in the second half, however, operating income grew 4.4 % to ¥1,683 million (US$14.0 million) for the fiscal year. An extraordinary loss was recorded in provision for doubtful debt, leading to a decline in net income of 55.0 % to ¥318 million (US$2.6 million).

Bolstering Strengths in Information and Technology for the 21st Century

Amid such dramatic changes in the operating environment as shortened construction periods, lower costs and scarce labor, Toshiba Plant Kentsets must shake free from a business model that relies heavily on technicians and pursue higher efficiency to strengthen competitiveness and accelerate management processes. To accomplish this, we are entering accumulated information into databases to be shared and strategically used to improve project efficiency, lessen our dependence on technicians and bolster the profit structure. We are also aggressively advancing development of new construction methods and training highly capable technicians to modernize construction projects. Based on its long-term management vision extending to 2010, Toshiba Plant Kensets is positioned to expand business and provide the finest in engineering while differentiating itself from other companies through advancements in information and technology.

Outlook

Supported by various financial and monetary measures adopted by the Japanese government, the business downturn has shown signs of bottoming out. Companies are beginning to engage in full-fledged employment adjustments and are closing down excess facilities. As the economy moves slowly toward recovery, a full economic rebound from weak consumer spending and slack capital investment is not expected for some time. With this outlook, TOSHIBA PLANT KENSETSU will intensify efforts to reduce expenditures through reorganization following a Companywide review of all available data on past measures to reform its revenue structure. In addition, while gaining momentum in lowering the cost of construction projects, we will continue to work aggressively overseas to secure orders and extend existing businesses to peripheral fields. We will also strive to create new businesses in the environmental field in tune with changes in the market. Entering the 21st century, the Company is in position to advance growth and development as a comprehensive engineering construction company trusted domestically and internationally for its technologies and quality. We thank our shareholders for their continued support.