KAJIMA (1812) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the cumulative Q3 FY2026 period, construction profitability improved more than revenue growth, resulting in higher revenue and earnings. Revenue was ¥2,146.05B (+5.9% YoY), Operating Income was ¥171.81B (+81.6%), Ordinary Income was ¥167.15B (+65.1%), and Net Income was ¥123.34B (+63.2%). The Operating Income margin improved significantly to 8.0% from 4.7% in the same period of the previous year, with higher gross profit margins on completed construction contracts and increased earnings in the core Building and Civil Engineering Businesses driving company-wide performance.

Factors Affecting Performance

【Revenue】Revenue was ¥2,146.05B, representing a 5.9% YoY increase. Completed construction revenue expanded to ¥1,938.77B (+9.1%), driven by growth in the Building Business (external revenue of ¥865.50B, +15.7%) and Civil Engineering Business (¥314.44B, +5.4%). Meanwhile, overseas affiliates recorded ¥742.44B, a 3.7% YoY decline, becoming a drag on overall growth. The Development Business and other operations grew substantially to ¥4.66B, up 45.7%.

【Profit and Loss】Operating Income was ¥171.81B (+81.6% YoY), primarily due to the completed construction gross profit margin improving by approximately 403bp to 12.9% from 8.9% in the previous year. SG&A expenses were ¥122.07B, increasing only 4.3%, below the pace of revenue growth; consequently, the SG&A ratio declined to 5.7%. Special income included a net special gain of ¥13.28B, including a gain on sales of investment securities of ¥13.84B, meaning that a portion of Profit Before Tax of ¥180.43B reflected temporary factors. Net Income attributable to owners of the parent was ¥122.21B (+64.0% YoY). Revenue and earnings both increased, with the primary driver of earnings growth being the emergence of operating leverage from improved construction profitability.

Segment Analysis

The Building Business generated external revenue of ¥865.50B (+15.7% YoY) and segment profit of ¥64.32B (+79.9%), making it the largest business by profit. The Civil Engineering Business recorded external revenue of ¥314.44B (+5.4%) and profit of ¥57.38B (+134.4%), with its profit margin improving substantially to 18.2%, contributing to an increase in the company-wide margin. The Development Business and other operations generated revenue of ¥49.41B (+40.7%) and profit of ¥9.41B (+82.7%), maintaining a high profit margin of 19.0%. Domestic affiliates improved, with revenue of ¥279.74B (+9.6%) and profit of ¥20.56B (+77.9%), while overseas affiliates recorded revenue of ¥742.54B (-3.7%) and profit of ¥19.22B (+11.4%), with a profit margin of 2.6%, a low level compared with other segments.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 8.0% from 4.7% in the same period of the previous year, while the gross profit margin also increased to 13.7% from 10.4%. The Net Income margin improved to 5.7% from 3.7% in the previous year.【Cash Flow Quality】As the ¥13.84B gain on sales of investment securities was included in special income and Profit Before Tax of ¥180.43B contained temporary factors, recurring earnings power should be evaluated primarily based on Operating Income of ¥171.81B.【Investment Efficiency】Annualized ROE was 12.2%, supported by the combination of the Net Income margin, asset efficiency, and financial leverage.【Financial Soundness】The Equity Ratio improved from the previous year to 37.8%, while net assets increased 5.7% YoY to ¥1,350.26B. Interest-bearing debt, including short-term borrowings, long-term borrowings, and bonds, has been trending upward; the increasing reliance on short-term funding is a point requiring attention.

Cash Flow Analysis

Although the cash flow statement is not directly disclosed, funding trends can be inferred from changes in the balance sheet. Cash and deposits were ¥356.19B, virtually unchanged from ¥354.49B at the end of the previous year, indicating no significant change in cash. Meanwhile, real estate for sale increased 32.2% YoY to ¥337.17B, indicating that investment in the Development Business is absorbing funds. Short-term borrowings increased 16.1%, and reliance on short-term financing, including commercial paper and bonds due for redemption within one year, has increased somewhat. Advances received on uncompleted construction contracts were ¥202.74B, down 18.9% from the end of the previous year, indicating a reduction in the inflow of advance payments associated with construction progress. These factors indicate that, despite being in a phase of earnings improvement, working capital requirements associated with real estate investment and construction progress have become important issues for liquidity management.

Quality of Earnings

The increase in Operating Income was driven by the recurring factor of improved gross profit margins on completed construction contracts, and overall earnings quality is favorable. However, Profit Before Tax of ¥180.43B included the temporary ¥13.84B gain on sales of investment securities; therefore, the Net Income growth rate (+63.2%) cannot be compared directly with the Operating Income growth rate (+81.6%). In non-operating income and expenses, interest income of ¥13.99B and dividend income of ¥6.60B were recorded, while interest expense amounted to ¥18.48B. Total non-operating expenses of ¥27.81B exceeded total non-operating income of ¥23.15B, resulting in a net burden of ¥4.66B. Comprehensive Income was ¥145.89B, of which ¥145.74B was attributable to owners of the parent. Compared with Net Income of ¥123.34B, this included a positive ¥37.62B adjustment in valuation difference on available-for-sale securities, partly offset by a negative foreign currency translation adjustment of ¥13.49B. The divergence between Comprehensive Income and Net Income was primarily attributable to market fluctuation factors.

Earnings Forecast and Guidance

Progress toward the full-year company forecasts was 70.8% for Revenue (forecast: ¥3,030B), 75.4% for Operating Income (forecast: ¥228B), and 74.0% for Ordinary Income (forecast: ¥226B). Operating Income was slightly above the standard 75% progress rate after nine months, indicating steady progress toward achieving the full-year forecast. On the other hand, Revenue progress was below the standard rate, requiring approximately ¥884.95B in revenue recognition during Q4. The earnings forecast was revised during the quarter, while the full-year Operating Income forecast maintained a growth plan of +50.1% versus the previous fiscal year. Forecast EPS is ¥364.11.

Shareholder Returns

The Q2 dividend was ¥56.00 per share, and the full-year dividend forecast is ¥132.00. No revision was made to the dividend forecast during the quarter. Mechanically calculating based on forecast Net Income attributable to owners of the parent of ¥170B, the dividend forecast of ¥132, and average shares outstanding during the period of 467.21 million shares results in an estimated Payout Ratio of approximately 36%, below the general sustainability benchmark of 60%. Retained earnings are substantial at ¥1,038.45B, providing sufficient internal reserves to support continued dividend payments.

Risk Factors

1. Construction Profitability Volatility Risk: The gross profit margin on completed construction contracts improved significantly to 12.9% from 8.9% in the previous year; however, this improvement could reverse due to fluctuations in material prices, labor costs, subcontracting expenses, and design changes. As the Building and Civil Engineering Businesses account for the majority of company-wide profit, the impact of any deterioration in profitability could be substantial.

2. Profitability of Overseas Affiliates: Overseas affiliates recorded revenue of ¥742.54B (-3.7% YoY) and a profit margin of 2.6%, both low levels compared with other segments. Vulnerability to foreign exchange movements, country risk, and fluctuations in the profitability of overseas projects remains.

3. Reliance on Short-Term Financing: Short-term borrowings increased 16.1% YoY, and reliance on commercial paper and bonds due for redemption within one year is also evident. Changes in market conditions could affect refinancing costs and financing terms.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

As comparative data against the industry median is insufficient for the Company's Operating Income margin and Net Income margin, the assessment is limited to their absolute levels.

Growth and Capital Efficiency

Similarly, comparative data against the industry median is insufficient for the Revenue growth rate; therefore, only the Company's performance is presented.

※Source: Compiled by the Company

Key Points in the Financial Results

1. The improvement in the Operating Income margin to 8.0% from 4.7% in the previous year and the 81.6% increase in Operating Income indicate an improvement in recurring earnings power led by the improvement in the gross profit margin on completed construction contracts (8.9%→12.9%).

2. Progress toward the full-year Operating Income forecast was 75.4%, slightly above the standard 75% progress rate after nine months, indicating steady progress toward achieving the full-year plan.

3. The 32.2% increase in real estate for sale and the 16.1% increase in short-term borrowings indicate rising funding needs associated with development investment. The future funding structure and collection status will be key areas of focus.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,161–¥3,348 at Cost of Equity ±1%, and ¥3,244–¥3,266 at ω±0.1.

Notes:

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

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

---

This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.

---End of Report---