HAZAMA ANDO CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

This quarterly financial performance marked an increase in both revenue and earnings, with improved profitability in the Building Business driving company-wide profits. Revenue was ¥105.04B (+12.4% YoY), Operating Income was ¥6.48B (+22.3% YoY; operating margin of 6.2%), Ordinary Income was ¥6.34B (+41.7% YoY), and Net Income attributable to owners of the parent (hereinafter the same) was ¥4.24B (+34.9% YoY). Growth in both revenue and profit in the Building Business more than offset the decline in revenue and earnings in the Civil Engineering Business, while improvements in non-operating income and expenses also enabled Ordinary Income to grow faster than Operating Income.

Factors Affecting Financial Performance

【Revenue】Company-wide Revenue was ¥105.04B (+12.4% YoY). By segment, the Building Business grew significantly to ¥68.03B (+24.6%), leading the company-wide increase in revenue. Meanwhile, the Civil Engineering Business declined to ¥28.71B (-10.5%), the Group Business (consolidated subsidiaries) was ¥21.22B (+17.1%), and Other Businesses were ¥1.52B (+1.9%). The increase in revenue from the Building Business (approximately ¥13.5B) substantially exceeded the decrease in revenue from the Civil Engineering Business (approximately ¥3.4B), securing company-wide revenue growth.

【Profit and Loss】Operating Income was ¥6.48B (+22.3%), and the operating margin improved to 6.2% from 5.7% in the prior year, an improvement of +0.5pt. The gross profit margin was 13.9% (prior year 13.8%, +0.1pt), while the SG&A expense ratio was 7.7% (prior year 8.1%, -0.4pt), with improved SG&A efficiency contributing to the higher profit margin. By segment, Operating Income in the Building Business increased substantially to ¥6.47B (+73.3%; margin of 9.5%), driving company-wide earnings. In contrast, the Civil Engineering Business recorded ¥1.91B (-47.7%; margin of 6.7%), a significant decline, suggesting the impact of higher costs and project mix. The Group Business improved modestly to ¥0.29B (+111.9%; margin of 1.3%). Ordinary Income was ¥6.34B (+41.7%), exceeding the growth rate of Operating Income, because net non-operating expenses, including foreign exchange losses and interest expenses, declined from ¥0.83B in the prior year to ¥0.15B in the current period. Net Income was ¥4.24B (+34.9%). The prior year included extraordinary gains, such as gains on the sale of investment securities, totaling ¥0.39B net, whereas the current period included only ¥0.02B in extraordinary losses. This absence of extraordinary gains was the factor behind the slightly slower growth in Net Income compared with Ordinary Income. Overall, the company achieved higher revenue and earnings, with improved profitability in the Building Business serving as the structural growth driver.

Segment Analysis

The Building Business generated revenue of ¥68.03B (64.8% of total; +24.6%) and Operating Income of ¥6.47B (+73.3%; margin of 9.5%), increasing its contribution to earnings as the company’s core business. The Civil Engineering Business recorded revenue of ¥28.71B (27.3% of total; -10.5%) and Operating Income of ¥1.91B (-47.7%; margin of 6.7%), representing declines in both revenue and earnings. Its margin fell substantially from approximately 11% in the prior year, suggesting deterioration in costs and project profitability. The Group Business (consolidated subsidiaries) recorded revenue of ¥21.22B (+17.1%) and Operating Income of ¥0.29B (+111.9%; margin of 1.3%), while Other Businesses recorded revenue of ¥1.52B (+1.9%) and Operating Income of ¥0.18B (+43.5%; margin of 11.7%). The margin gap between the Building and Civil Engineering Businesses (9.5% versus 6.7%) has widened from the prior year, and the dispersion of profitability within the business portfolio may be affecting company-wide capital efficiency.

Key Financial Indicators

【Profitability】The operating margin was 6.2% (prior year 5.7%, +0.5pt), the gross profit margin was 13.9% (prior year 13.8%, +0.1pt), and the net profit margin was 4.0% (prior year 3.4%, +0.7pt), with all three improving from the prior year.【Cash Flow Quality】Accounts receivable from completed construction contracts declined to ¥196.16B (¥200.66B at the end of the prior year, -2.2%), while costs on uncompleted construction contracts declined to ¥4.58B (¥5.45B at the end of the prior year, -16.0%). At the same time, advances received on uncompleted construction contracts increased to ¥38.47B (¥31.66B at the end of the prior year, +21.5%), indicating a strengthened advance-payment structure.【Investment Efficiency】ROE was 2.0%, which can be decomposed into a net profit margin of 4.0%, total asset turnover (Revenue/total assets) of 0.255 times, and financial leverage of approximately 1.9 times.【Financial Soundness】The Equity Ratio was 52.6% (50.9% at the end of the prior year, +1.7pt), the current ratio was 163.4%, total liabilities/equity was 0.90 times, and interest coverage based on Operating Income was 44.1 times (Operating Income of ¥6.48B/interest expenses of ¥0.15B), indicating an overall stable financial foundation.

Cash Flow Analysis

Cash and deposits were ¥6.446B, essentially unchanged from ¥6.466B at the end of the prior year (-0.3%). In terms of working capital, accounts receivable from completed construction contracts amounted to ¥196.16B and represented a significant proportion of assets, but declined from the end of the prior year, suggesting progress in collections. Costs on uncompleted construction contracts declined to ¥4.58B (¥5.45B at the end of the prior year, -16.0%), while advances received on uncompleted construction contracts increased to ¥38.47B (¥31.66B at the end of the prior year, +21.5%), with the strengthened advance-payment structure supporting working capital. Investment securities increased to ¥64.10B (¥49.54B at the end of the prior year, +29.4%), indicating that a portion of funds was allocated to market-linked assets. Short-term borrowings of ¥20.98B and long-term borrowings of ¥6.50B were both essentially unchanged from the end of the prior year, with no significant change in the borrowing structure. Overall, the reduction in working capital and increase in advance payments are considered positive factors for cash generation.

Quality of Earnings

Extraordinary items in the current period consisted only of ¥0.02B in extraordinary losses, indicating that temporary factors were limited. In contrast, the prior-year period included ¥0.42B in extraordinary gains, including ¥0.30B in gains on the sale of investment securities and ¥0.09B in gains on the sale of fixed assets. Accordingly, current-period earnings have shifted toward a more recurring nature. Non-operating income and expenses consisted of dividend income of ¥0.08B, interest expenses of ¥0.15B, foreign exchange losses of ¥0.04B, and other items, resulting in net expenses of ¥0.15B. This was a significant reduction from the prior-year net expenses of ¥0.83B and was the primary reason that the growth rate of Ordinary Income (+41.7%) exceeded that of Operating Income (+22.3%). The effective tax rate declined to 32.6% from 35.4% in the prior year, also contributing to the improvement in the net profit margin. Comprehensive income increased significantly to ¥13.87B from ¥5.35B in the prior year, primarily due to a ¥9.26B increase in valuation differences on investment securities. It should be noted that the gap between Comprehensive Income and Net Income of ¥4.24B resulted from market-linked equity items rather than recurring earnings power.

Earnings Forecast and Guidance

Progress against the company’s full-year forecast was 21.4% for Revenue (¥105.04B/¥490B), 19.1% for Operating Income (¥6.48B/¥34B), 18.9% for Ordinary Income (¥6.34B/¥33.6B), and 19.1% for Net Income (¥4.24B/¥22.2B). Although all were below the 25% benchmark for even quarterly progress, the construction industry has seasonality weighted toward the second half in line with construction progress, and the current-period progress rates remain within that range. As of the current quarter, no revisions have been made to either the earnings forecast or the dividend forecast.

Shareholder Returns

The company’s annual dividend plan is ¥84. The Payout Ratio against the company’s projected EPS of ¥141.51 is approximately 59.4%. No data on share repurchases has been disclosed, and shareholder returns are therefore evaluated solely on the basis of dividends. Given the financial foundation consisting of an Equity Ratio of 52.6% and cash and deposits of ¥6.446B, the company has secured the funds necessary to execute its dividend plan.

Risk Factors

1. Deterioration in the profitability of the Civil Engineering Business: The Civil Engineering Business recorded revenue of ¥28.71B (-10.5%) and Operating Income of ¥1.91B (-47.7%), with the decline in earnings substantially exceeding the decline in revenue. The margin fell to 6.7%, and deterioration in costs and project profitability is having a significant impact on earnings. Future corrective trends will affect the company-wide profit margin.

2. Risk of fluctuations in the valuation of investment securities: Investment securities increased to ¥64.10B (15.6% of total assets), representing growth of +29.4% from the end of the prior year. The increase in Comprehensive Income to ¥13.87B depended primarily on valuation differences of ¥9.26B. Accordingly, fluctuations in Comprehensive Income and equity may widen when market conditions change.

3. Collection status of accounts receivable from completed construction contracts: Accounts receivable from completed construction contracts amounted to ¥196.16B and represented a significant proportion of assets. While the strengthened advance-payment structure, reflected in advances received on uncompleted construction contracts of ¥38.47B (+21.5%), supports working capital, collection trends for trade receivables remain an item requiring close monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. While the margin in the Building Business improved to 9.5%, the margin in the Civil Engineering Business declined to 6.7%, widening the profitability gap between the segments. As a structural change within the business portfolio, the increased dependence on the Building Business for profits is a notable feature of the financial results.

2. Comprehensive Income of ¥13.87B substantially exceeded Net Income of ¥4.24B. The difference was attributable to ¥9.26B in valuation differences on investment securities, which are equity items distinct from recurring earnings power and should be evaluated separately.

3. Advances received on uncompleted construction contracts increased to ¥38.47B (+21.5%), strengthening the advance-payment structure. This supports future revenue recognition in line with construction progress and provides a reference point for assessing the second-half-weighted progress toward the full-year plan.

Theoretical Share Price (For Reference)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,426–¥1,507 at ±1% for the cost of equity, and ¥1,464–¥1,468 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting a professional adviser as necessary.

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