| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥817.0B | ¥695.6B | +17.5% |
| Operating Income | ¥59.2B | ¥31.8B | +86.3% |
| Ordinary Income | ¥61.2B | ¥33.7B | +81.9% |
| Net Income | ¥38.1B | ¥20.1B | +89.2% |
| ROE | 9.9% | 5.8% | - |
For the fiscal year ended March 2026, Revenue was ¥817.0B (YoY +¥121.4B, +17.5%), Operating Income was ¥59.2B (YoY +¥27.4B, +86.3%), Ordinary Income was ¥61.2B (YoY +¥27.5B, +81.9%), and Net Income attributable to owners of the parent was ¥38.1B (YoY +¥18.0B, +89.2%), representing substantial top- and bottom-line growth. Revenue increased for the third consecutive year. Operating Income grew 1.86x year-on-year, exceeding the full-year guidance (Operating Income ¥48.0B) by over 23%. Gross margin improved to 19.6% (prior year 17.3%, +2.3pt) and operating margin improved to 7.2% (prior year 4.6%, +2.6pt), indicating significant profitability improvement. The primary drivers were higher-margin Geotechnical Improvement operations and scale-driven decreases in SG&A ratio. Conversely, Operating Cash Flow (OCF) turned negative to -¥23.0B (prior year +¥6.2B) as increases in receivables and contract assets and decreases in contract liabilities caused working capital to move against cash flow. Free Cash Flow was -¥36.0B and dividend payments of ¥9.0B were not covered by OCF, resulting in an increase in short-term borrowings to ¥150.0B (YoY +¥45.0B, +42.9%). Financial leverage remains acceptable, but the short-term concentration of liabilities (short-term liabilities ratio 97%) is a concern.
Revenue of ¥817.0B (YoY +17.5%) was mainly driven by Completed Contract Revenue of ¥787.6B (prior year ¥663.8B). By segment, the Geotechnical Improvement Business posted Revenue of ¥461.4B (prior year ¥393.3B, YoY +17.4%), Civil Engineering Business posted ¥337.4B (prior year ¥283.8B, YoY +18.9%), both core segments achieving double-digit growth. Geotechnical Improvement comprised onshore/offshore ground improvement works and rental of construction equipment; Civil Engineering comprised road, tunnel, and port works, all remaining robust. The Block Business declined to ¥23.3B (prior year ¥26.5B, YoY -12.0%). Segment revenue composition: Geotechnical Improvement 56.5%, Civil Engineering 41.3%, Block 2.9%, with Geotechnical Improvement contributing the largest share. External environment was supportive with steady public investment and private construction demand, and backlog digestion plus new orders bolstered revenue.
Cost of sales was ¥657.2B (prior year ¥575.5B, YoY +14.2%), rising less than revenue, resulting in Gross Profit of ¥159.8B (YoY +¥39.8B, +33.2%) and a substantial gross profit expansion. Gross margin improved to 19.6% (prior year 17.3%, +2.3pt) and Completed Contract Gross Profit Margin improved to 18.7% (prior year 16.2%, +2.5pt). Improvements in project profitability and successful price pass-through contributed. SG&A was ¥100.6B (prior year ¥88.3B, YoY +13.9%), increasing at a lower rate than revenue, improving SG&A ratio to 12.3% (prior year 12.7%, -0.4pt), reflecting scale-driven leverage. As a result, Operating Income of ¥59.2B rose sharply YoY (+86.3%). Non-operating items included equity-method income ¥1.2B and dividend income ¥2.5B, contributing to Ordinary Income of ¥61.2B (YoY +81.9%). Extraordinary items included gain on sale of investment securities ¥4.3B and impairment losses ¥0.6B among special losses totaling ¥4.3B, netting to a small amount. After income taxes of ¥17.4B (effective tax rate 28.1%), Net Income attributable to owners of the parent was ¥38.1B (YoY +89.2%). Conclusion: both revenue and profit increased.
The Geotechnical Improvement Business recorded Revenue ¥461.4B (YoY +17.4%) and Operating Income ¥71.6B (YoY +111.0%), with an operating margin of 15.5% (prior year 8.6%, +6.9pt). Increased orders of high-margin ground improvement projects and improved construction efficiency drove profits, making this core segment the main contributor to consolidated operating income. The Civil Engineering Business grew Revenue to ¥337.4B (YoY +18.9%) but Operating Income fell to ¥2.8B (YoY -49.9%), with an operating margin of 0.8% (prior year 1.6%, -0.8pt). Rising project costs and lower-margin contracts weakened profitability and diluted consolidated profit margins. The Block Business saw Revenue decline to ¥23.3B (YoY -12.0%) but Operating Income rose slightly to ¥0.7B (YoY +9.5%), with an operating margin of 3.0% (prior year 2.7%). Corporate/adjustments were -¥16.2B, an increase of ¥7.6B YoY (prior year -¥8.6B). The adjustment includes company-wide R&D expenses of ¥15.2B, reflecting a change from allocation to segments in prior years to centralization as corporate expense. While Geotechnical Improvement's higher margins drove consolidated profits, improving profitability in Civil Engineering remains a key challenge.
Profitability: Operating margin 7.2% (prior year 4.6%), Ordinary margin 7.5% (prior year 4.8%), Net margin 4.7% (prior year 2.9%), improving across all levels. ROE 9.9% (historical estimate: prior year 6.6%), ROA (on Ordinary Income basis) 9.1% (prior year 5.6%), indicating improved capital efficiency. EBITDA was ¥96.3B (Operating Income ¥59.2B + Depreciation ¥37.1B) with an EBITDA margin of 11.8%, up from 9.4% (+2.4pt). Completed Contract Gross Profit Margin was 18.7% (prior year 16.2%), indicating improvement in construction-specific metrics.
Cash quality: Operating Cash Flow was -¥23.0B versus Net Income ¥38.1B, giving an OCF/NI ratio of -0.60x, signaling deterioration in cash quality. Working capital increases were the main cause: Accounts receivable -¥62.0B, Accounts payable -¥20.2B, Contract liabilities -¥12.8B pressured OCF. Cash conversion versus EBITDA was -0.24x (EBITDA ¥96.3B). Depreciation ¥37.1B versus CapEx ¥16.3B yields an investment ratio of 0.44x, indicating restrained renewal investment.
Investment efficiency: Total asset turnover improved to 1.15x (prior year 1.08x). Receivables turnover days extended and contract liability decline reduced advance-payment buffers.
Financial soundness: Equity Ratio 54.2% (prior year 53.3%), Debt/Equity ratio 0.41x (prior year 0.34x) increased. Current ratio 170% (prior year 160%), Quick ratio 160% (prior year 151%) indicate solid short-term liquidity. Interest-bearing debt ¥159.5B (short-term borrowings ¥150.0B + long-term borrowings ¥4.5B + leases ¥6.0B), with a short-term ratio of 97% indicating short-term concentration. Debt/EBITDA 1.66x, Interest Coverage 71x (EBITDA ¥96.3B / interest expense ¥1.4B) show strong ability to service interest, though reliance on short-term funding is notable. Cash ¥104.3B covers 70% of short-term borrowings.
Operating Cash Flow was -¥23.0B (prior year +¥6.2B). Pre-tax profit was ¥62.1B, but working capital reversal significantly drained cash. Subtotal (before working capital changes) was -¥11.2B, and even after recording depreciation ¥37.1B and non-cash adjustments including impairment ¥0.6B, OCF remained slightly negative. Increases in trade receivables and contract assets of -¥62.0B (delays in progress billing and acceptance), decreases in trade payables of -¥20.2B (shortened payment terms), and decreases in contract liabilities of -¥12.8B (reduced advance receipts) were the primary causes, worsening working capital by -¥95.0B. Corporate tax payments of -¥13.8B also contributed to cash outflows. Investing Cash Flow was -¥12.9B: acquisitions of tangible and intangible fixed assets -¥16.3B, acquisition of investment securities -¥0.1B, offset by loan repayments ¥3.8B and proceeds from sale of securities ¥4.5B, resulting in a net outflow. Free Cash Flow was -¥36.0B, meaning dividends ¥9.0B and investments were not covered by OCF. Financing Cash Flow was +¥36.5B, driven by net increase in short-term borrowings +¥43.0B, long-term borrowings repayment -¥3.8B, treasury stock purchase -¥0.1B, and dividend payments -¥9.0B. Cash increased slightly from ¥104.0B at the beginning of the period to ¥104.3B at the end (+¥0.4B). The working capital reversal may reflect a temporary mismatch between project progress and billing cycles; recovery of collections next fiscal year will be key to normalizing liquidity. Reliance on short-term borrowings introduces interest-rate and refinancing risks; shifting to long-term funding and early restoration of positive OCF are priorities.
The majority of Operating Income ¥59.2B was from core operations; non-operating income ¥4.8B (dividend income ¥2.5B, equity-method income ¥1.2B, foreign exchange gains ¥0.3B, etc.) was limited. Extraordinary items netted to +¥0.9B (special gains ¥5.2B, special losses ¥4.3B), making the distinction between recurring and one-off items clear; most profit originated from recurring core operations. Gain on sale of investment securities ¥4.3B was a one-off factor but contributed only about 11% to Net Income ¥38.1B, so it is not the main driver and earnings quality is high. The large divergence between Net Income ¥38.1B and OCF -¥23.0B highlights a significant timing gap between profit recognition and cash collection (increased accruals). Comprehensive income was ¥47.4B, ¥9.3B higher than Net Income ¥38.1B; Other Comprehensive Income comprised foreign currency translation adjustments -¥0.2B, valuation difference on securities ¥2.4B, and retirement benefit adjustments ¥0.4B for a net +¥2.6B. The uplift in comprehensive income was mainly due to the increase in current-period profit; there are no major distortions to earnings quality. Provision for construction loss reserves decreased to ¥0.5B (prior year ¥1.3B), suggesting improved project profitability. However, the deterioration in OCF implies increased accruals; future collection trends and normalization of working capital are prerequisites for improving cash quality.
Full-year guidance was Revenue ¥810.0B, Operating Income ¥48.0B, Ordinary Income ¥49.0B, Net Income ¥32.0B (EPS ¥211.23). Actual results exceeded guidance across the board: Revenue ¥817.0B (achievement rate 101%), Operating Income ¥59.2B (123%), Ordinary Income ¥61.2B (125%), Net Income ¥38.1B (EPS ¥294.62, achievement rate 139%). Revenue nearly met initial expectations, and profits significantly exceeded them due to higher-margin Geotechnical Improvement results and SG&A restraint. The Operating Income beat versus guidance was +¥11.2B, mainly because Geotechnical Improvement Operating Income of ¥71.6B far exceeded plan. Net Income had the largest overachievement, aided by better-than-expected non-operating and extraordinary items. The company did not revise the full-year guidance during the year, resulting in a large upside. Next fiscal year guidance has not yet been announced; assumptions will need to include maintenance of Geotechnical Improvement high margins, improved profitability in Civil Engineering, and normalization of working capital. Dividend was increased to a year-end ¥115 (from initial full-year guidance ¥30), and a commemorative dividend of ¥30 is planned at Q2 of FY2027 (March 2027) for the 20th anniversary, strengthening shareholder returns.
Dividend for the period was year-end ¥115 (prior year had no annual dividend disclosure, assumed year-end only). Total dividends amounted to ¥9.2B against Net Income ¥38.1B, implying a payout ratio of 41.3%, which is within a reasonable range. Share buybacks were ¥0.1B and the return policy is dividend-focused. Total return ratio was approximately 41.6%, similar to the payout ratio. With Free Cash Flow -¥36.0B and dividends ¥9.2B, the coverage ratio was -2.5x, indicating dividends were funded by current-period profit and borrowings. Dividend burden versus EBITDA (¥96.3B) was modest at 10%, but negative OCF means sustainability depends on working capital improvement. A commemorative dividend of ¥30 is planned at Q2 FY2027, indicating a dividend-increasing stance next fiscal year. With cash ¥104.3B and retained earnings ¥189.8B, dividend capacity is sufficient, but considering repayment of short-term borrowings ¥150.0B and growth investments, early OCF turnaround is needed to sustain shareholder returns. A payout ratio in the 40% range is standard for the construction industry; improvement in FCF could enable further increases.
Working capital reversal risk: Accounts receivable -¥62.0B, Contract liabilities -¥12.8B, Accounts payable -¥20.2B led to a -¥95.0B deterioration in working capital and a fall to OCF -¥23.0B. While timing mismatches in project progress and billing/collection cycles are the main cause, persistence would pressure liquidity. Prolonged lengthening of DSO and the decline in contract liabilities (advance payments) reduce cash buffers and increase dependence on short-term borrowings ¥150.0B (YoY +42.9%). Shortening DSO and restoring contract liabilities are key to stabilizing cash flow.
Short-term liability concentration risk: Of interest-bearing debt ¥159.5B, ¥150.0B is short-term borrowings, representing 94%; long-term borrowings are only ¥4.5B (3%). Short-term liabilities ratio 97% shows a maturity mismatch and heightens refinancing and interest-rate risk. Although cash ¥104.3B covers 70% of short-term borrowings, continued working capital reversal could erode liquidity buffers. Converting to long-term funding and achieving early positive OCF to reduce debt is necessary.
Segment margin disparity risk: Geotechnical Improvement operating margin 15.5% versus Civil Engineering 0.8%, a gap of ~15pt. Civil Engineering posted Revenue ¥337.4B (YoY +18.9%) but Operating Income ¥2.8B (YoY -49.9%), showing marked margin deterioration. Cost inflation and lower-margin projects are dilutive to consolidated profitability. High reliance on Geotechnical Improvement means any market deterioration or intensified competition that reduces margins could negatively impact consolidated earnings. Strengthening project selection and cost control in Civil Engineering is required.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.2% | 5.5% (3.5%–7.2%) | +1.7pt |
| Net Margin | 4.7% | 3.5% (2.5%–4.4%) | +1.1pt |
Operating margin 7.2% and Net margin 4.7% exceed industry medians, placing the company in the upper tier within construction. High margins in Geotechnical Improvement drive these results.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 17.5% | 9.8% (-2.1%–15.1%) | +7.7pt |
Revenue growth 17.5% significantly exceeds the industry median 9.8%, with both Geotechnical Improvement and Civil Engineering achieving double-digit growth and driving above-industry expansion.
※ Source: Company aggregation
High-margin Geotechnical Improvement operations and scale effects drove substantial profitability improvement: Operating margin 7.2% (prior year 4.6%), ROE 9.9% (prior year estimate 6.6%). The company exceeded full-year guidance (Operating Income ¥48.0B) by over 23%, with Geotechnical Improvement Operating Income ¥71.6B (margin 15.5%) leading consolidated results. Improved segment mix and scale-driven SG&A ratio reductions were the primary drivers of structurally improved profitability. However, Civil Engineering’s operating margin deteriorated to 0.8%, making margin recovery a future priority.
Cash flow quality deteriorated: OCF -¥23.0B, Free Cash Flow -¥36.0B, OCF/NI -0.60x, Cash conversion (OCF/EBITDA) -0.24x indicate delays in converting profits to cash. Working capital reversal (Accounts receivable -¥62.0B, Contract liabilities -¥12.8B, Accounts payable -¥20.2B) was the main driver, and dividends ¥9.2B were not covered by OCF, increasing reliance on short-term borrowings ¥150.0B (YoY +42.9%). High short-term debt ratio 97% raises refinancing risk; normalization of working capital and extension of funding tenor are top priorities for next fiscal year. If the working capital reversal is a temporary timing issue due to project progress and billing cycles, improvement is expected next year; if persistent, liquidity risk increases.
Dividend was year-end ¥115 with a payout ratio of 41.3%, within a reasonable range. A commemorative dividend of ¥30 is planned at Q2 FY2027 as part of strengthened shareholder returns. Retained earnings ¥189.8B and cash ¥104.3B provide sufficient dividend capacity, but FCF coverage ratio -2.5x and negative CF mean sustainability depends on OCF improvement. Debt/EBITDA 1.66x and Interest Coverage 71x indicate financial resilience, but short-term liability concentration and working capital reversal warrant monitoring. Maintaining Geotechnical Improvement margins, improving Civil Engineering profitability, and normalizing receivables/contract liabilities are keys to sustaining medium-term growth.
This report is an AI-generated earnings analysis document created by analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are compiled by the Company from public financial disclosures and are for reference only. Investment decisions are your responsibility; please consult a professional as needed.