Business Overview 4. DX Regional Collaboration Project Signpost's DX and Regional Collaboration Project started in March 2022 with the establishment of the DX and Regional Collaboration Division. It aims to provide products and services that contribute to regional collaboration by collaborating with local financial institutions nationwide, utilizing its own DX technology and open innovation. In August 2022, it began working with Oita Made Co., Ltd., which was established with the investment of multiple companies in Oita Prefecture, including Oita Bank, to sell original products made in Oita Prefecture to both domestic and overseas markets and to match local companies and Signpost's products and services in order to promote the revitalization of Oita Prefecture's economy. In addition, in April 2024, it started offering DX support services for medium-sized and small businesses. As the first effort, it supports the creation of DX declaration by (The) Fourth Hokuriku Bank, Ltd. (Niigata City, Niigata Prefecture) to deploy DX declaration support services to the market. Furthermore, it will realize new solutions by commercializing its own technology and open innovation and promote regional collaboration through innovation.
1. Business content The main business of Sakai Heavy Industries <6358> is the manufacturing and sale of road rollers used for road paving, and road roller related products account for about 95% of its revenue. In addition, the company's corporate philosophy is to contribute to the world's land development through its road construction machinery business. 2. Characteristics and strengths As previously mentioned, the company is a specialist manufacturer of road construction machinery such as road rollers, but has the following characteristics and strengths. (1) Long history as a specialist manufacturer The company's biggest feature (strength) is its long history as a specialist manufacturer of road construction machinery, including road rollers. In other words, by focusing on and specializing in its global niche strategy, it has accumulated its own unique technologies. This long history and experience have enabled it to enhance its technical and credit strengths. (2) Technical strengths Simply saying "compacting or paving roads" requires different pressures, rotation forces, etc. (compaction technology) depending on the location, soil conditions, etc. According to the company, the construction function of the roller itself determines the final quality (density, flatness, lifespan) of the road or embankment, and it is generally said that if the compaction density is increased by 1%, the road lifespan is extended by 10%. Therefore, for construction clients and contractors, product quality (performance) is also a very important factor, in addition to the price of road rollers. Since the company has been a specialist manufacturer of road construction machinery, including road rollers, for a long time, it boasts high technical strengths in compaction technology that are not easily matched by other companies in the same industry. In summary, the technical strength of the company can be described as "knowledge about entities and concepts." In other words, it is their engineering ability to oversee the entire construction project and their ability to adapt to a variety of materials. Specifically, it is the combination of various technologies, such as mixing with tires, vertical vibration to increase the compaction force, horizontal vibration to scrape the ground, vertical vibration to form a thick layer of compaction, further high-density compaction by tire vibration, and solution to difficult compaction problems through high-frequency vibration. An example of the company's high technical strength is the ability to control the relationship between "mechanical vibration technology" and its "vibration suppression technology." Various mechanical vibrations are an important means of improving construction performance in road rollers, but this vibration itself can cause machine malfunctions and have a significant impact on operator comfort. Therefore, the power (technology) to control the conflicting relationship between vibration compaction strength and machine quality is important, and this cannot be accumulated in a short period of time.
Sakai Heavy Industries <6358>'s main business is the manufacturing and sale of road rollers used for road paving, and road roller related products account for about 95% of its revenue. In addition, the company's corporate philosophy is to contribute to the world's land development through its road construction machinery business.
When talking about road rollers, there are various abilities and sizes. The number of products the company offers is about 20 types on the platform alone, and with variations, the number of final products is around 70-80. Sizes range from about 0.5 tons to about 20 tons (for large civil engineering projects). While the main range of prices is between 5 million yen (for medium-sized rollers) and 10 million yen (for large rollers), there are also things such as road cutters that cost tens of millions of yen. Production is expected, and custom production is not carried out. The service life of a product is 20-30 years, but few customers use them up completely, and in most cases, replacement demand occurs after statutory depreciation (6-7 years). In addition, many of the depreciated equipment is resold overseas (especially in developing countries) as second-hand goods.
The regional breakdown of sales for the March 2024 fiscal year was 14,320 million yen (43.4% of sales), 9,700 million yen in North America (29.4%), 7,566 million yen in Asia (22.9%), and other regions accounted for 1,432 million yen (4.3%).
"Regional segment sales" refers to sales classified by customer location and is different from "sales by location" reported in the financial statements.
The major sales destinations are about 70% for construction machinery rental companies (Kanamoto <9678>, Nishio Holdings <9699>, etc.) in Japan, and the remaining approximately 30% are sold to end-users (large and small general contractors, road construction companies, etc.). Finance company transactions are also included for end-users due to credit control. Overseas, they are mainly sold to end-users through agents, but in North America, some are sold through rental companies.
Characteristics and strengths As previously mentioned, the company is a specialist manufacturer of road construction machinery such as road rollers, but has the following characteristics and strengths.
As previously mentioned, the company is a specialist manufacturer of road construction machinery such as road rollers, but has the following characteristics and strengths.
(1) Long history as a specialist manufacturer The company's biggest feature (strength) is its long history as a specialist manufacturer of road construction machinery, including road rollers. In other words, by focusing on and specializing in its global niche strategy, it has accumulated its own unique technologies. This long history and experience have enabled it to enhance its technical and credit strengths.
The company's biggest feature (strength) is its long history as a specialist manufacturer of road construction machinery, including road rollers. In other words, by focusing on and specializing in its global niche strategy, it has accumulated its own unique technologies. This long history and experience have enabled it to enhance its technical and credit strengths.
(2) Technical strengths Simply saying "compacting or paving roads" requires different pressures, rotation forces, etc. (compaction technology) depending on the location, soil conditions, etc. According to the company, the construction function of the roller itself determines the final quality (density, flatness, lifespan) of the road or embankment, and it is generally said that if the compaction density is increased by 1%, the road lifespan is extended by 10%. Therefore, for construction clients and contractors, product quality (performance) is also a very important factor, in addition to the price of road rollers. Since the company has been a specialist manufacturer of road construction machinery, including road rollers, for a long time, it boasts high technical strengths in compaction technology that are not easily matched by other companies in the same industry.
Simply saying "compacting or paving roads" requires different pressures, rotation forces, etc. (compaction technology) depending on the location, soil conditions, etc. According to the company, the construction function of the roller itself determines the final quality (density, flatness, lifespan) of the road or embankment, and it is generally said that if the compaction density is increased by 1%, the road lifespan is extended by 10%. Therefore, for construction clients and contractors, product quality (performance) is also a very important factor, in addition to the price of road rollers. Since the company has been a specialist manufacturer of road construction machinery, including road rollers, for a long time, it boasts high technical strengths in compaction technology that are not easily matched by other companies in the same industry.
In summary, the technical strength of the company can be described as "knowledge about entities and concepts." In other words, it is their engineering ability to oversee the entire construction project and their ability to adapt to a variety of materials. Specifically, it is the combination of various technologies, such as mixing with tires, vertical vibration to increase the compaction force, horizontal vibration to scrape the ground, vertical vibration to form a thick layer of compaction, further high-density compaction by tire vibration, and solution to difficult compaction problems through high-frequency vibration.
An example of the company's high technical strength is the ability to control the relationship between "mechanical vibration technology" and its "vibration suppression technology." Various mechanical vibrations are an important means of improving construction performance in road rollers, but this vibration itself can cause machine malfunctions and have a significant impact on operator comfort. Therefore, the power (technology) to control the conflicting relationship between vibration compaction strength and machine quality is important, and this cannot be accumulated in a short period of time.
(3) Creditworthiness.
The company's creditworthiness is also a strength supported by experience in engineering and achievements. For the technology that ensures the quality of compaction underground, it is a black box and cannot be easily imitated by latecomers or non-specialized manufacturers. For example, the asphalt mixed material transported at high temperature needs to be constructed within a limited time, and if there is a construction defect, it will incur a significant cost for re-construction. In addition, the occurrence of construction quality problems in roads and embankments has a delayed effect, and the quality of compaction at completion tends to become a black box. This experiential engineering is a strength due to the familiar brand used for many years and knowledge gained from various site experiences, and these points have gained trust from many customers.
3. Market share and competition. According to the data by Japan Construction Machinery and Construction Equipment Association, the domestic and export construction machinery shipment in 2023 was approximately 370 billion yen, of which the main products of the company, such as road machinery including road rollers, accounted for about 2.3%. In the road roller market within the road machinery market, the company's share exceeds 70% and it has become the top manufacturer. Competitors include Hitachi Construction Machinery, Ltd. <6305> and others, but none are specialized manufacturers. In addition, although some foreign manufacturers have also entered, they have a weak presence. Therefore, in Japan, it can be said that the ups and downs of the market is directly linked to the company's performance. In the global market (overseas market), although there are no accurate statistics, the company's estimated share (based on production volume) is around 5-6%. However, this is based on the entire world market, and in the market that the company is focusing on, such as Japan, ASEAN, and North America, the share is about 15%. The main competitors in the global market are Caterpillar, FAYAT SAS, WIRTGEN GROUP, Volvo Personvagnar AB, etc., but there are no specialized manufacturers for road rollers.
In the global market (overseas market), although there are no accurate statistics, the company's estimated share (based on production volume) is around 5-6%. However, this is based on the entire world market, and in the market that the company is focusing on, such as Japan, ASEAN, and North America, the share is about 15%. The main competitors in the global market are Caterpillar, FAYAT SAS, WIRTGEN GROUP, Volvo Personvagnar AB, etc., but there are no specialized manufacturers for road rollers.
(Written by FISCO guest analyst Noboru Terashima)