| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue | ¥688.7B | ¥645.5B | +6.7% |
| Operating Income | ¥53.3B | ¥54.3B | -1.8% |
| Ordinary Income | ¥55.4B | ¥55.6B | -0.3% |
| Net Income | ¥33.8B | ¥37.5B | -9.7% |
| ROE | 6.4% | 7.3% | - |
For the fiscal year ended March 2026, Revenue was ¥688.7B (YoY +¥43.1B +6.7%), Operating Income was ¥53.3B (YoY -¥1.0B -1.8%), Ordinary Income was ¥55.4B (YoY -¥0.2B -0.3%), and Net Income was ¥33.8B (YoY -¥3.6B -9.7%), resulting in higher sales but lower profits at each profit tier. Operating margin declined to 7.7% from 8.4% a year earlier (-0.7pt), and Net margin fell to 4.9% (prior 5.8%) (-0.9pt). The core Construction Business (sales composition 82.6%) increased Revenue to ¥568.9B (+5.0%) but Operating Income declined to ¥47.2B (-5.7%); gross margin held at 18.1% while SG&A ratio rose to 10.4% (prior 9.6%), with higher fixed costs pressuring profitability. Conversely, the Port Business (Revenue ¥39.4B, +31.2%) and Steel Structures Business (Revenue ¥79.3B, +6.9%) achieved both revenue and profit growth, modestly improving segment diversification. A recorded special loss of ¥8.8B reduced the bottom-line by roughly 10% year-on-year. With an Equity Ratio of 64.3% and Debt/EBITDA of 0.67x underpinning a solid financial base, the company executed a payout with a Payout Ratio of 51.2% and a ¥10.0B share buyback, bringing the Total Return Ratio to approximately 87%. Operating Cash Flow (OCF) turned negative to -¥1.3B, raising concerns as an increase in completed contract receivables and higher tax payments led to weak cash realization of Net Income.
Revenue: Revenue rose to ¥688.7B (+6.7%), driven by growth in completed construction revenue. By segment, the Construction Business remained the core at ¥568.9B (+5.0%), accounting for 82.6% of the total. The Port Business expanded sharply to ¥39.4B (+31.2%) as new projects ramped up. The Steel Structures Business also grew to ¥79.3B (+6.9%). Gross profit on completed contracts increased to ¥124.7B (gross margin 18.1%) from ¥116.6B (gross margin 18.1%) a year earlier, up ¥8.1B, with gross margin essentially flat. Although there were concerns over higher labor and material costs, price pass-through and project mix preserved prior-year gross margin levels.
Profitability: Operating Income decreased slightly to ¥53.3B (-1.8%), with operating margin down to 7.7% from 8.4% (-0.7pt). The main factor was an increase in SG&A, which rose to ¥71.3B (10.4% of Revenue) from ¥62.3B (9.6%) a year earlier—an increase of ¥9.0B (+14.5%) and a 0.8pt rise in SG&A ratio. Higher fixed costs including personnel expenses, recruitment, and safety measures compressed margins. By segment, the Construction Business' Operating Income fell to ¥47.2B (-5.7%), weighing on consolidated results, while the Port Business delivered ¥2.4B (+308.5%) and the Steel Structures Business ¥3.1B (+13.7%), reflecting portfolio diversification effects. Non-operating income of ¥4.2B, including dividends received of ¥1.6B, supported profit, and non-operating expenses of ¥2.2B, including interest expense of ¥0.4B, were minor; Ordinary Income thus held at ¥55.4B (-0.3%). In extraordinary items, special gains of ¥1.0B (including ¥0.3B gain on negative goodwill) were offset by special losses of ¥8.8B (including ¥0.8B loss on retirement of fixed assets), reducing profit before tax to ¥47.6B (-14.2%). After corporate taxes of ¥13.8B (effective tax rate 29.0%), Net Income contracted to ¥33.8B (-9.7%), resulting in revenue growth but profit decline.
The Construction Business posted Revenue of ¥568.9B (+5.0%) and Operating Income of ¥47.2B (-5.7%, margin 8.3%), showing revenue growth but profit decline as higher SG&A prevented maintaining the prior-year margin of 8.3%; fixed cost control remains an issue. Orders for prestressed concrete works and bridge repair/strengthening were robust, but rising labor and subcontracting costs constrained Operating Income growth. The Steel Structures Business achieved Revenue of ¥79.3B (+6.9%) and Operating Income of ¥3.1B (+13.7%, margin 3.9%), supported by expanded orders and improved profitability for bridges and steel structures, improving margin from 3.6% a year earlier (+0.3pt). The Port Business recorded high growth with Revenue of ¥39.4B (+31.2%) and Operating Income of ¥2.4B (+308.5%, margin 6.1%), driven by full-scale operation of port and civil engineering projects and margin improvement, raising margin from 2.0% to +4.1pt. Gains from newly acquired consolidated subsidiaries also contributed to greater segment diversification. Other segments (solar power generation, real estate leasing, internet-related) generated Revenue of ¥2.7B (-9.5%) and Operating Income of ¥0.6B (-33.3%, margin 21.8%), with limited contribution to the whole.
Profitability: ROE was 6.4% (prior 7.4%), down 1.0pt, mainly due to lower Net Income margin and higher total assets. ROA was 6.9% (prior 7.4%), down 0.5pt. Operating margin of 7.7% fell 0.7pt from 8.4% primarily due to a higher SG&A ratio of 10.4% (prior 9.6%). Net margin of 4.9% declined 0.9pt from 5.8%, also impacted by special losses. Cash Quality: Operating Cash Flow was -¥1.3B, a sharp deterioration from ¥78.0B a year earlier, yielding an OCF/Net Income ratio of -0.04x. The main drivers were an increase in trade receivables (CF impact -¥53.4B) and higher tax payments (-¥20.8B). Operating CF subtotal (before working capital changes) was ¥16.6B and solid, but delayed collection of completed-contract receivables of ¥340.5B (prior ¥295.0B) hampered cash realization. Investment Efficiency: Total asset turnover was 0.83x (prior 0.84x), roughly unchanged. Capital expenditures were ¥29.2B, 1.70x depreciation of ¥17.2B, indicating proactive growth investment. EBITDA was ¥70.5B (EBITDA margin 10.2%), showing solid cash-generation capacity, but OCF/EBITDA was -0.02x, indicating weak cash conversion. Financial Soundness: Equity Ratio remained high at 64.3% (prior 66.8%). Current ratio was 252%. Cash and deposits were ¥156.0B against short-term borrowings of ¥20.8B, yielding a cash/short-term debt ratio of 7.5x and strong liquidity. Interest-bearing debt totaled ¥47.0B (short-term borrowings ¥20.8B, long-term borrowings ¥26.2B), Debt/EBITDA 0.67x, and interest coverage 121x, indicating very low risk. Goodwill was ¥28.0B (5.3% of equity), and retirement benefit liabilities were ¥11.7B (substantial decrease from prior ¥26.1B), indicating limited off-balance-sheet risks.
Operating Cash Flow was -¥1.3B, a sharp decline from ¥78.0B a year earlier, and the OCF/Net Income ratio deteriorated to -0.04x, indicating lower cash realization quality. The main cause was an increase in completed contract receivables, with changes in trade receivables impacting CF by -¥53.4B and year-end balance swelling to ¥340.5B (prior ¥295.0B, +15.4%). Tax payments increased to -¥20.8B (prior -¥16.7B), reflecting higher corporate tax outflows. Conversely, construction payables increased to ¥119.4B (+21.3%), contributing +¥21.5B to CF from accounts payable changes, and a decrease in inventories (work-in-progress payment decreased from ¥27.5B to ¥23.0B) provided +¥4.7B inflow. However, advances received on uncompleted contracts fell from ¥27.3B to ¥17.0B (-37.8%), shrinking the advance payment buffer and exacerbating working capital increase. Operating CF subtotal of ¥16.6B (prior ¥93.8B) less working capital change of -¥17.9B resulted in negative OCF. Investing CF was -¥28.6B, mainly due to capital expenditure of -¥29.2B, indicating an active growth investment stance. Financing CF was -¥14.8B, reflecting dividend payments of -¥19.0B and share buybacks of -¥10.0B, netted by long-term debt repayments of -¥3.9B and a net increase in short-term borrowings of +¥20.7B. Free Cash Flow was -¥29.9B (Operating CF -¥1.3B + Investing CF -¥28.6B), and cash and deposits decreased 22.8% from ¥202.1B to ¥156.0B.
Earnings quality shows that Ordinary Income of ¥55.4B exceeded Operating Income of ¥53.3B by ¥2.1B due to non-operating income. Non-operating income of ¥4.2B, largely driven by dividends received of ¥1.6B, has some sustainability. Non-operating expenses of ¥2.2B, including interest expense of ¥0.4B, are minor, and financial costs do not materially pressure profits. However, special losses of ¥8.8B reduced profit before tax from Ordinary Income of ¥55.4B to ¥47.6B (impact -¥7.8B). Special items including loss on retirement of fixed assets of ¥0.8B and gain on negative goodwill of ¥0.3B are largely non-recurring, so underlying earnings power should be assessed at Ordinary Income level. Comprehensive income was ¥47.1B, ¥13.3B above Net Income of ¥33.8B; other comprehensive income of ¥13.2B comprised valuation differences on available-for-sale securities ¥5.9B and adjustments related to retirement benefits ¥7.4B, reflecting contributions from interest rate movements and stock price increases. Weak cash conversion is notable with OCF/Net Income -0.04x and OCF/EBITDA -0.02x, driven by year-end expansion of completed contract receivables and contraction of advances received on uncompleted contracts, creating timing differences between revenue recognition and cash collection. Provision for construction losses increased to ¥5.0B (prior ¥2.1B, +139.5%), embedding the risk of underperforming projects. Going forward, earnings quality will hinge on improvement in working capital management, restoration of advance payment buffers, and the trajectory of construction loss provisions.
Full-year guidance projects Revenue ¥750.0B (+8.9%), Operating Income ¥40.0B (-25.0%), Ordinary Income ¥45.0B (-18.8%), and Net Income ¥27.5B (-18.7%), expecting revenue growth but significant profit decline. Operating margin is guided at 5.3% (down -2.4pt from current 7.7%), reflecting assumed SG&A ratio increases and more conservative project margins. H1 results already achieved Revenue ¥688.7B and Operating Income ¥53.3B, representing 91.8% progress toward full-year Revenue and 133.3% progress on Operating Income, respectively. The guidance implies a substantial deterioration in margin in the remaining period, suggesting assumptions of project margin deterioration, cost increases, and adverse project mix. EPS forecast is ¥21.29, and dividend forecast is ¥7.00 per share (implied Payout Ratio approx. 33%), lowered to a conservative level to prioritize cash flow normalization and financial stability. If full-year Operating Income of ¥40.0B materializes, H2 Operating Income would be expected at -¥13.3B (loss), implying the guidance assumes significant margin deterioration from large project underperformance or increases in fixed costs. The unusually conservative full-year projection relative to current results reflects management's cautious stance and preparation for uncertainty.
Dividends totaled ¥14.5 per share during the period (year-end dividend ¥7.5, interim dividend ¥7.0), with total dividends against Net Income of ¥33.8B amounting to approximately ¥19.4B and a Payout Ratio of 51.2%, a reasonable level. Additionally, the company implemented ¥10.0B share buybacks, bringing total shareholder returns to about ¥29.4B and a Total Return Ratio of approximately 87%. Free Cash Flow was -¥29.9B, so dividends plus buybacks were not covered by FCF, implying funding via cash drawdown and borrowings. Nevertheless, ample liquidity (cash and deposits ¥156.0B) and a healthy financial profile (Debt/EBITDA 0.67x) limit near-term risk to return continuity. Next fiscal year dividend guidance is ¥7.0 per share (forecast EPS ¥21.29, payout approx. 33%), a plan to halve the current-year dividend, reflecting a policy to prioritize cash flow normalization and conservative profit outlook. Sustainability of dividends depends on recovery in Operating CF and success in working capital management—faster collection of trade receivables and rebuilding advance payment buffers will determine return capacity. Continuation of share buybacks will depend on future OCF improvements.
Working Capital Expansion Risk: Prolonged collection of completed contract receivables (¥340.5B, +15.4%) and shrinking advance payment buffer on uncompleted contracts (¥17.0B, -37.8%) caused OCF to deteriorate to -¥1.3B. With OCF/Net Income -0.04x and OCF/EBITDA -0.02x, cash conversion is extremely weak. If order growth or project expansion continues to increase working capital burden, liquidity pressure and higher borrowing dependence may ensue. Managing collection terms on construction contracts and securing advances are urgent priorities.
SG&A Ratio Increase and Margin Deterioration Risk: SG&A ratio rose to 10.4% (prior 9.6%, +0.8pt), pushing Operating margin down to 7.7% (prior 8.4%). Next-year guidance anticipates a 25% decline in Operating Income and an Operating margin of 5.3%, implying further deterioration, with risks from weaker project margins, higher labor costs, and rising subcontracting expenses. The provision for construction losses rose to ¥5.0B (prior ¥2.1B, +139.5%), increasing the risk that underperforming projects will further compress margins.
Concentration Risk in Core Segment: The Construction Business accounts for 82.6% of Revenue and 88.6% of Operating Income, so revenue structure remains concentrated. Operating Income in this segment declined by 5.7% YoY, and delays, margin slippages on large projects, or adverse weather can directly affect consolidated results. While growth in Port Operation Service and Steel Structures has improved diversification, reliance on the Construction Business remains high, and further diversification of the business portfolio is necessary.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.7% | 5.5% (3.5%–7.2%) | +2.2pt |
| Net Margin | 4.9% | 3.5% (2.5%–4.4%) | +1.4pt |
Both Operating and Net margins exceed industry medians, indicating relative strength in profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.7% | 9.8% (-2.1%–15.1%) | -3.1pt |
Revenue growth rate is below the industry median, suggesting a somewhat slower growth pace compared with peers.
※ Source: Company compilation
The shift to negative Operating Cash Flow (-¥1.3B, OCF/Net Income -0.04x) and the expansion of completed contract receivables (¥340.5B, +15.4%) highlight working capital management issues. If collection delays persist amid order growth, liquidity pressure and higher borrowing dependency are concerns. Improving trade receivables turnover days and restoring advance payment buffers are prerequisites for cash flow normalization and sustaining shareholder returns.
Next-year guidance projects Revenue growth of +8.9% but expects Operating Income to fall -25% with Operating margin at 5.3% (down -2.4pt from 7.7%), reflecting higher SG&A ratio and conservative project margins. The increase in construction loss provisions to ¥5.0B (+139.5% YoY) signals possible margin weakness. Success in passing through labor/material inflation and controlling fixed costs will determine future margin trends. Although segment diversification has progressed (Port Business +31.2%, Steel Structures +13.7% profit growth), concentration in Construction (Revenue 82.6%, Operating Income 88.6%) remains high; improving profitability in the core business is essential for consolidated stability.
Financial foundations are solid—Equity Ratio 64.3%, Debt/EBITDA 0.67x, cash and deposits ¥156.0B—allowing high shareholder returns (Total Return Ratio 87%: Payout Ratio 51.2% + share buybacks) with considerable downside resilience. However, next-year dividend guidance of ¥7.0 per share (half of this year’s ¥14.5) signals a priority on cash flow normalization. Key items to watch include the timing of OCF recovery, order backlog trends, control of SG&A ratio, sustainability of growth in Port and Steel Structures businesses, and the pace of margin recovery in the Construction Business.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.