Real Estate Development Forest Products Division by psf35982


									Sojitz Corporation Annual Report 2006

      Business Divisions and Group

                                                                         Real Estate Development
                                                                         & Forest Products Division
                                                                         Organizational structure
                                                                         • Planning & Administration Office
                                                                         Real Estate Development Unit
                                                                         • Urban Development Dept.
                                                                         • Construction & Development Dept.
                                                                         Forest Products Unit
                                                                         • Log Marketing Dept.
                                                                         • Lumber & Panel Marketing Dept.

      President, Real Estate Development & Forest
      Products Division
      Masao Ichishi

                                        Business Activities Overview                                    Fiscal 2005 Results
                                        The Real Estate Development & Forest Products Division          In fiscal 2005, ended March 31, 2006, the division recorded
                                        comprises the Real Estate Development Unit, which has a         net sales of ¥419.7 billion and gross trading profit of ¥24.0
                                        reputation for its product planning and development capa-       billion. Recurring profit increased ¥2.3 billion to ¥8.2 billion.
                                        bilities in downstream fields, and the Forest Products Unit,        In the condominium development business operated
                                        which boasts a dominant market share in upstream fields.        by the Real Estate Development Unit, the unit developed
                                        The division aims to generate maximum synergies by making       19 projects comprising 2,623 units in the Tokyo metropoli-
                                        the most of the particular characteristics of each business.    tan area. Two examples were Park West Tokyo and Grazioso
                                             The Real Estate Development Unit has positioned the        Nishi-Ogikubo. In the Kansai region the unit developed six
                                        condominium and retail property development businesses          projects comprising 955 units, including The Lestage Le
                                        as its core domains and undertakes projects based on            Credor Osaka. Meanwhile, in its retail property develop-
                                        accurate appraisal of market trends and changing needs.         ment business, the division started second-phase
                                        In conducting these businesses, it acts as a comprehensive      construction at the Mallage Saga shopping center, which
                                        developer with extensive planning and development               opened in March 2003, to expand floor space. It also
                                        capabilities, underpinned by the highly-developed               concluded the sale of Mallage Kashiwa, which opened in
                                        information-gathering network commanded by Sojitz as a          July 2004. In March 2006, Sano Premium Outlets reopened
                                        sogo shosha (general trading company). In future, the unit      following its third floor-area extension, and in Kita-ku, Kobe,
                                        plans to leverage its reservoir of know-how to move into        the division started building its sixth domestic outlet mall
                                        development of commercial properties such as offices and        project, expected to open around summer 2007.
                                        logistics centers.                                                  In Real Estate Development Unit businesses, the unit
                                             The Forest Products Unit is involved in a wide range of    took a cautious approach emphasizing profitability, includ-
                                        operations, including importing timber and timber prod-         ing targeted withdrawal from low-profit businesses. As a
                                        ucts from around the world, offshore trade, and overseas        result, net sales for the unit decreased 13%, but gross trad-
                                        timber processing. It is also engaged in a variety of domes-    ing profit remained level with the previous fiscal year.
                                        tic businesses including distribution of timber products and        In Forest Products Unit businesses, despite a 4.0% year-
                                        construction materials, principally by Sun Building Materials   on-year increase in domestic housing starts in 2005,
                                        Corporation and Sojitz Housing Materials Corporation.
                                                                                                                                                     Annual Report 2006 Sojitz Corporation

Value Chain for Forest Products & Building Material Business
           Upstream business functions                                   Midstream business functions                              Downstream business function
 • Raw material purchasing a traditional
                                                                 • Industry-leading import capability
   strength                                                                                                                  • Proposal-based marketing to end-users
                                                                 • Distribution to large-scale manufacturers
 • Manufacturing based on active
                                                                   and wholesalers
   investments and loans

 Largest network of overseas bases in the industry (Russia: 2;
 China: 3; North America: 2; Southeast Asia: 2; Oceania: 2)      Products imported using large vessels                      Nationwide network of sales offices in Japan
                                                                                                                            (29 offices)
 Unprocessed wood sourced from 4 main supplier areas:
 (Russia, North America, Southeast Asia, Oceania)
                                                                 Sales network based on long-term relationships of          Marketing product packages tailored to
 Manufacturing bases in supplier areas                           trust with customers                                       customer needs
 (Russia: 2; China: 3; Southeast Asia: 2; Oceania: 1)

 Sun Building Materials Corporation (Japan), Sojitz Housing Materials Corporation (Japan), Yoshimoto Ringyo Co., Ltd. (Japan), Zao Komsomolsk Forest Products (Russia), Sojitz Forest
 Products (EM) Sdn. Bhd. (Malaysia), PT. Mitra Mutiara Woodtech (Indonesia), Samling Housing Products Sdn. Bhd. (Malaysia), Tachikawa Forest Products (NZ) Ltd. (New Zealand)

                                 Feedback from end-users is directed upstream to supply products with enhanced added-value

wooden-frame houses recorded only a slight 0.4% increase,                  further extend our business reach based on new
while domestic sales prices stagnated due to increased trade               approaches as a comprehensive developer.
inventory. In response, the unit conducted a thorough                           In the Forest Products Unit, we will make use of the
review of unprofitable businesses. Results for the unit,                   Sojitz brand—which boasts a long tradition in plywood and
however, were disappointing, with net sales down 15%                       timber trading—to aggressively pursue new projects based
year on year, and gross trading profit also down 19%.                      on investment and loans overseas, especially in Russia and
                                                                           China. The ultimate aim of this approach will be to bolster
Business Strategy                                                          our capabilities in the planning of Sojitz brand products. In
In the Real Estate Development Unit’s condominium devel-                   Japan, meanwhile, we will target improved group manage-
opment business the unit maintains a market-leading                        ment efficiency and respond to changes in distribution
position, even among sogo shosha. We plan to draw on                       channels by integrating the operations of our Lumber &
our expertise in the field to expand the business further. To              Panel Marketing Department with Sun Building Materials.
do so, we will create distinctive condominium developments                 This will enable us to strengthen our downstream sales
and develop new products that build on earlier innovations                 capabilities by marketing packages that combine timber
such as condominiums with all-electric amenities.                          products and construction materials.
    In the retail property development business, we will                        Sojitz was the first Japanese corporation to obtain
move into the development of “neighborhood shopping                        exclusive distribution rights for Solomon Islands plantation
centers” located in cities, and urban commercial facilities,               timber approved by the internationally recognized Forest
as well as our existing suburban shopping centers. This step               Stewardship Council (FSC). We intend to build on this
anticipates reforms to Japan’s three major town-planning                   achievement by continuing to establish environmentally
laws that restrict planning in suburban areas. In addi-                    friendly businesses going forward.
tion, we will rigorously apply exit strategies to upgrade
our assets. Bearing in mind surging real estate prices
recently, we will also develop commercial properties that
make use of our finance schemes, as well as our reservoir
of planning and development capabilities. Moreover, we
will strengthen collaboration with Group companies to
Sojitz Corporation Annual Report 2006

                  Major Business Activities
                  Real Estate Development & Forest Products Division
                                          Grand Residence Abiko—The Quest for Comfort
                                          “Next-generation living on a global scale” was the design concept for this condominium complex
                                          that affords a place to live surrounded by greenery and offers the spiritual peace we all yearn for.
                                          Fully equipped with modern amenities, 738 units in the complex were sold in around four months.
                                          Boasting a spacious courtyard garden as its main feature, Grand Residence Abiko incorporates an
                                          array of public spaces that only a complex of this scale can offer. Care is also taken to locate
                                          facilities appropriately. The sitting areas, gym and theater room are all located near the entrance,
                                          with other facilities including guestrooms and a party room situated among the trees.

                                          External view of Grand Residence Abiko

                                          Mid Southern Residence Gotenyama—an Oasis of Tranquility in the
                                          Heart of the City
                                          History and tradition merge with the future, combining the natural and the man-made to
                                          transform the heart of the city into an oasis of relaxation and tranquility. Offering a new
                                          way of living in the city, condominiums in Mid Southern Residence Gotenyama sold out to
                                          great acclaim. Artfully expressing a design concept that draws on both the energy and calm
                                          of city life, the development has earned an excellent reputation for the exceptionally high
                                          quality of workmanship.
                                          External view of Mid Southern Residence Gotenyama

                                          Outlet Mall Business—a Wealth of Popular Brands
                                          Chelsea Japan Co., Ltd., a joint venture in which Sojitz has an equity interest, has been
                                          developing and operating large-scale outlet malls in Rinku, Sano, Tosu, and Toki, as well as
                                          the flagship Gotemba Premium Outlets. The company is also currently developing a new
                                          outlet center in Sanda, Hyogo Prefecture. Chelsea outlet malls are the largest outlet malls in
                                          Japan, boasting between one and two hundred well-known brand shops over each extensive
                                          site. They have already proved extremely popular, with families and couples, including some
                                          from far afield, ensuring high customer footfall throughout the day.

                                          Toki Premium Outlets, one of Japan’s largest outlet malls

                                          Large-scale Suburban Shopping Centers—From Shopping to Relaxing
                                          The Sojitz Group develops and operates large-scale suburban shopping complexes. These sites
                                          feature specialty outlets including restaurants, novelty goods shops and fashion boutiques,
                                          developed around anchor facilities such as supermarkets, home centers and cinemas. The Group
                                          is currently working to expand floor space at Mallage Saga, which opened in March 2003, by
                                          adding additional facilities centering on a cinema complex and public baths. The renovated
                                          shopping center is due to reopen in November 2006. Meanwhile, the Group is actively seeking
                                          out and investigating promising locations for future shopping centers throughout Japan.

                                          Mallage Saga—Second-phase expansion plans under way

                                          Comprehensive Property Management Business—Ensuring Peace of
                                          Mind and Reliability
                                          Sojitz General Property Management Corporation offers a full line of property management
                                          services for condominium, office and commercial facilities. The company had a portfolio of
                                          24,182 condominiums under management as of March 31, 2006, and expects to increase
                                          this figure by 2,000 annually. The Company provides services using systems such as its propri-
                                          etary NAMS-24 remote surveillance system. Other systems include the MUAS accounting
                                          system, and F-net, which helps reception staff perform administrative tasks.
                                          NAMS-24 offers round-the-clock remote surveillance.

                                          Condominium Sales, Furnishing Retail and Property Consulting Busi-
                                          ness—Providing Homes With a Difference
                                          Sojitz Realnet Corporation is the Sojitz Group’s total property services company handling the planning
                                          and sale of two to three thousand units a year. It is engaged in a diverse range of businesses from the
                                          interior design of show-units and sale of home furnishings, to condominium sale center design, construc-
                                          tion and proposals. The company also acts as intermediary in property-related transactions, provides
                                          advice on the effective utilization of property, and offers other consulting services. The Company is
                                          determined to achieve a level of customer satisfaction that is second-to-none in every field of operations.
                                          Internal view of condominium sales center

                                                                                 Annual Report 2006 Sojitz Corporation

First Veneer Processing Plant in the Russian Far East
Demand is currently increasing for structural plywood materials. In order to secure stable supplies,
Sojitz is planning to participate in a ¥3.5 billion investment to build a veneer processing plant. To be
located in resource-rich Russia, which boasts the largest land area of forest in the world, the plant
will be the first wood veneer plant in the Russian Far East. In this project Sojitz will be partnering
with Flora Joint-Stock Company, a leading forest products company in the Russian Far East. Japan’s
largest wood-processing company, Seihoku Corporation, will provide technical support and purchase
all of the output from the plant, which is slated to come on stream in the fall of 2007.

Planned site for veneer processing plant in Russia

Sojitz Obtains Exclusive Rights to Distribute FSC-approved Timber
Sojitz has signed an exclusive agreement with the UK-owned forestry plantation operator Kolombangara
Forest Products Ltd. to distribute timber from plantation forests in the Solomon Islands. This agree-
ment makes Sojitz the first Japanese company to handle timber from the Solomon Islands that is
approved by the Forest Stewardship Council (FSC). In conjunction with this agreement, Sojitz has also
obtained chain of custody certification of forest products, and it regularly supplies FSC-approved
products to Japanese plywood manufacturers. As the largest timber handler in Japan, the Company
will continue working to establish environmentally friendly business practices.

Plantation in the Solomon Islands

One of New Zealand’s Largest Lumber Production Bases
Sojitz and Tachikawa Forest Products Co., Ltd. established Tachikawa Forest Products (N.Z.)
Ltd. in Rotorua, New Zealand, in 1989. As one of New Zealand’s largest lumber production
bases, the plant will work to boost its sales not only to Japan, but also to areas where demand
is growing such as China, Southeast Asia and the Middle East.

The lumber plant operated by Tachikawa Forest Products (N.Z.) is among the largest in New Zealand

Lumber Production Business in the Chinese Megamarket
Following their joint venture in New Zealand, Sojitz and Tachikawa Forest Products Co., Ltd.
also reached an agreement to manufacture lumber in Taicang, Jiangsu Province, near
Shanghai. Currently, construction of a sawmill is in progress, with operations scheduled to
commence in the fall of 2006. The sawmill will be a major producer of lumber for furniture in
the Chinese market and, as such, will respond to anticipated growth in demand for timber
products in the country.

A sawmill is currently under construction

Sun Building Materials Corporation*—Number One Share of the Lum-
ber Market
Sun Building Materials Corporation responds accurately to market demand for environmen-
tally friendly and safe materials to create optimal living spaces. It boasts the industry’s leading
trading volume for plywood and also has a competitive edge in the sale of other interior
building materials, building construction supplies and home fittings. In October 2006, Sun
Building Materials and Sojitz’ Lumber & Panel Marketing Department will integrate their
operations to offer a complete range of building materials.
Plywood handled by Sun Building Materials

Japan Building Materials Mall—Opened in Shanghai
Sun Building Materials and YZJ Investment & Management Co., Limited have opened the
Japan Building Materials Mall in Shanghai. Permanently dedicated to showcasing and selling
high-quality Japanese building materials, the center will respond to needs in the increasingly
high-quality oriented Chinese market. The center offers full support to exhibiting firms seek-
ing to establish themselves in China, assisting them with distribution, marketing, design and
construction, and advertising using the Chinese mass media.

Building in downtown Shanghai housing the Japan Building Materials Mall

                          * Company name to be changed to Sojitz Building Materials Corporation on October 1, 2006.

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