| Indicator | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥3960.3B | ¥3668.1B | +8.0% |
| Operating Income | ¥280.3B | ¥211.0B | +32.8% |
| Ordinary Income | ¥273.8B | ¥202.2B | +35.4% |
| Net Income | ¥244.3B | ¥175.3B | +39.3% |
| ROE | 12.0% | 9.7% | - |
For the fiscal year ended March 2026, Revenue was ¥3,960.3B (YoY +¥292.2B +8.0%), Operating Income was ¥280.3B (YoY +¥69.3B +32.8%), Ordinary Income was ¥273.8B (YoY +¥71.6B +35.4%), and Net Income attributable to owners of the parent was ¥240.7B (YoY +¥65.2B +37.2%), achieving higher revenue and materially higher profit. Gross margin improved to 13.7% (up +1.7pt from 12.0% a year earlier), and operating margin improved to 7.1% (up +1.3pt from 5.8%), indicating a significant improvement in profitability. Improved profitability in the Domestic Architectural Business and steady progress in the Civil Engineering Business drove operating profit growth, and the high-margin Asset Value-Added Business (operating margin 30.3%) boosted company-wide earnings. Extraordinary items resulted in net special gains of ¥66.0B, primarily from special gains of ¥88.6B including ¥83.4B of gains on sales of investment securities, less special losses of ¥22.6B, providing an after-tax one-off uplift of approximately ¥46B.
[Revenue] Revenue expanded steadily to ¥3,960.3B (+8.0%). By segment, Civil Engineering Business recorded ¥1,219.0B (+12.9%) and Architectural Business ¥2,167.4B (+12.1%), both achieving double-digit growth. The Asset Value-Added Business earned ¥254.9B (▲5.9%) and maintained high profitability despite lower revenue, and the Regional Environmental Solutions Business grew to ¥7.5B (+39.8%) but remains limited in scale. Conversely, International Business declined sharply to ¥362.9B (▲22.0%), with reduced overseas projects partially offsetting consolidated revenue growth. Revenue from completed construction contracts was ¥3,677.7B (prior year ¥3,362.9B, +9.4%), and revenue from development and other businesses was ¥282.6B (prior year ¥304.2B, ▲7.1%), with strong performance in core construction operations driving revenue expansion.
[Profitability] Gross profit was ¥542.8B (gross margin 13.7%), up ¥98.7B YoY, improving gross margin by +1.7pt from the prior year. Breakdown: gross profit on completed construction was ¥423.5B (gross margin 11.5%, up +1.6pt from 9.9% prior year), and gross profit for development and other businesses was ¥119.3B (gross margin 42.2%, up +7.2pt from 35.0% prior year), both showing marked margin improvements. Selling, general and administrative expenses (SG&A) were ¥262.5B (SG&A ratio 6.6%), up ¥32.5B YoY, with personnel and lease costs rising faster than revenue growth (+14.1%), but gross margin improvement absorbed this, resulting in Operating Income of ¥280.3B (operating margin 7.1%), a substantial YoY increase of +32.8%. Non-operating items saw financing costs increase (interest paid ¥23.1B, up ¥7.3B from ¥15.8B) and non-operating expenses expanded to ¥28.3B, partially offset by non-operating income of ¥21.9B (dividends received ¥6.0B, interest received ¥4.9B, foreign exchange gains ¥4.0B), resulting in Ordinary Income of ¥273.8B (+35.4%). Extraordinary items comprised special gains of ¥88.6B (mainly gains on sale of investment securities ¥83.4B) less special losses of ¥22.6B including impairment losses ¥16.1B, producing a net +¥66.0B. Profit before tax was ¥339.9B; after an effective tax rate of 29.8%, Net Income attributable to owners of the parent was ¥240.7B (+37.2%), with a net margin of 6.1% (up +1.3pt from 4.8%).
The Civil Engineering Business secured stable earnings with Revenue ¥1,219.0B (+12.9%), Operating Income ¥91.2B (+3.2%), and operating margin 7.5%. The Architectural Business achieved Revenue ¥2,167.4B (+12.1%), Operating Income ¥137.9B (+114.8%), and operating margin 6.4%, realizing significant profit improvement driven by normalization from prior low-margin projects and improved construction management efficiency. The International Business posted Revenue ¥362.9B (▲22.0%), Operating Loss of ¥23.6B (worsened by ¥15.6B from prior year loss of ¥8.0B), and operating margin ▲6.5%, with expanded losses as volatility in overseas projects weighed on consolidated earnings. The Asset Value-Added Business, despite Revenue decline to ¥254.9B (▲5.9%), delivered Operating Income ¥77.3B (+3.4%) and maintained an extremely high operating margin of 30.3%, accounting for roughly 27.6% of consolidated operating profit. The Regional Environmental Solutions Business recorded Revenue ¥7.5B (+39.8%) and Operating Loss ¥8.1B (worsened by ¥0.8B from prior year loss of ¥7.3B), with limited scale and contribution.
[Profitability] Operating margin was 7.1% (up +1.3pt from 5.8% prior year), net margin was 6.1% (up +1.3pt from 4.8%), and gross margin was 13.7% (up +1.7pt from 12.0%), reflecting improved margins in Architectural and Civil Engineering businesses. ROE was 12.0% (improved about +1.7pt from approximately 10.3% prior year), explainable by improved net margin combined with financial leverage (Total Assets/Equity approx. 3.36x) and asset turnover (Revenue/Total Assets approx. 0.58x). [Cash Quality] Operating Cash Flow (OCF) was ¥30.4B versus Net Income ¥244.3B, resulting in OCF/Net Income of 0.12x, extremely low, as increases in accounts receivable on completed contracts (+¥511.4B) and work-in-progress payments (+¥72.2B) absorbed cash. EBITDA (Operating Income ¥280.3B + Depreciation ¥50.6B = approx. ¥330.9B) had an OCF coverage of 0.09x, indicating working capital expansion is pressuring cash generation. [Investment Efficiency] Total asset turnover was approx. 0.58x (Revenue ¥3,960.3B ÷ Total Assets ¥6,860.1B), and EBITDA interest coverage was approx. 14.3x (EBITDA approx. ¥330.9B ÷ interest paid ¥23.1B), indicating strong interest-bearing capacity. [Financial Soundness] Equity Ratio was 29.8% (down ▲0.8pt from 30.6% prior year), D/E ratio was 2.36x (interest-bearing debt approx. ¥1,925B ÷ shareholders’ equity ¥816.4B, excluding non-controlling interests), remaining at a high level. Current ratio was 112.4% and quick ratio 112.3%, providing minimal liquidity, but short-term borrowings rose to ¥658.6B (+53.7%), indicating shortening of debt maturities and heightened refinancing risk. Debt/EBITDA was approx. 5.8x (interest-bearing debt approx. ¥1,925B ÷ EBITDA approx. ¥330.9B), well above investment-grade thresholds (≤2.5x).
Operating Cash Flow was ¥30.4B (down ▲48.3% from ¥58.9B prior year), markedly lower relative to Net Income ¥244.3B, with OCF/Net Income 0.12x. Subtotal (before working capital changes) was ¥93.2B and remained solid, but increases in accounts receivable on completed contracts (▲¥504.8B) and work-in-progress payments (▲¥72.2B) absorbed cash, partially offset by increases in advances received for construction in progress (+¥130.4B) and accounts payable for purchases (+¥75.0B). Investing Cash Flow was ▲¥74.6B (narrowed from ▲¥362.5B prior year), with acquisitions of tangible and intangible fixed assets totaling ¥233.5B partly funded by sales of investment securities ¥263.5B. Free Cash Flow was ▲¥44.1B, insufficient to cover dividends for the period, and Financing Cash Flow was +¥79.8B (bond issuance ¥20.0B, net increase in CP ¥10.0B, net decrease in long-term borrowings ▲¥193.9B) to compensate. Short-term borrowings increased sharply by +¥230.1B, reflecting an acceleration of short-term funding. Cash at period-end increased by ¥48.7B to ¥482.7B, but expansion of short-term liabilities and working capital absorption lowered cash quality.
Of Ordinary Income ¥273.8B, Operating Income ¥280.3B was the core, with non-operating income of ¥21.9B (dividends received ¥6.0B, interest received ¥4.9B, foreign exchange gains ¥4.0B, etc., representing 0.6% of Revenue) less non-operating expenses ¥28.3B (including interest paid ¥23.1B). The composition of non-operating income is balanced, indicating high reliance on recurring operating earnings. Net special items of +¥66.0B (Special gains ¥88.6B, including gains on sale of investment securities ¥83.4B; Special losses ¥22.6B, including impairment losses ¥16.1B) temporarily boosted profit before tax, raising after-tax final profit by roughly ¥46B. The divergence between Ordinary Income and Net Income is attributable to these special items, and a decline in one-off gains is expected next fiscal year. Accrual quality is weak with OCF/Net Income at 0.12x, mainly due to increases in accounts receivable on completed contracts and work-in-progress payments, indicating a mismatch in period-end recognition and collection timing. Recovery progress in the first half of the following fiscal year and normalization of working capital are essential to improve earnings quality.
Company guidance projects Revenue ¥4,400.0B (YoY +11.1%), Operating Income ¥285.0B (YoY +1.7%), Ordinary Income ¥265.0B (YoY ▲3.2%), Net Income ¥195.0B (YoY ▲20.2%), EPS ¥519.19, and annual dividend ¥110. While Revenue is expected to continue expanding, Operating Income is projected to be largely flat and Ordinary/Net Income to decline, reflecting a conservative forecast that incorporates the fall-off of this period’s special gains (e.g., gains on sale of investment securities). Progress rates as of the end of Q2 were Revenue 90.0%, Operating Income 98.3%, Ordinary Income 103.3%, and Net Income 125.3%, showing outperformance in the first half and a high probability of meeting full-year targets. Key focus for the second half will be the extent of International Business profit recovery, maintenance of core margins in Architectural and Civil Engineering businesses, and normalization of working capital.
Annual dividend was ¥230 (¥100 at Q2-end, ¥130 at year-end), with a payout ratio of 49.5%, a generous level. This is a substantial increase from the prior year annual dividend of ¥100, reflecting the company’s decision to return increased earnings to shareholders. However, Free Cash Flow was ▲¥44.1B and could not cover total dividends of ¥87.3B, meaning dividend funding was effectively supplemented by increased borrowings and recycling of investment securities. Next fiscal year guidance assumes an annual dividend of ¥110, equivalent to a payout ratio of about 56%, indicating a commitment to continue returns despite the one-off gain decline, although normalization of OCF and extension of debt maturities are prerequisites for sustainable returns. No share buyback is indicated; the total return policy is dividend-focused.
Working capital expansion and cash efficiency: Increases in accounts receivable on completed contracts +¥511.4B and work-in-progress payments +¥72.2B have constrained operating cash flow to ¥30.4B, producing OCF/Net Income 0.12x and OCF/EBITDA 0.09x—extremely low levels. Continued mismatches in period-end recognition and collection timing could increase vulnerability in cash generation, raising reliance on additional borrowings and CP rollovers. Collection progress in the first half of the following fiscal year will be critical.
Concentration of short-term liabilities and refinancing risk: Short-term borrowings ¥658.6B (+53.7%), CP ¥300.0B, and bonds maturing within one year ¥190.0B have led to a significant rise in short-term liabilities, with current liabilities ratio at 75.8% remaining elevated. Under high leverage (D/E 2.36x, Debt/EBITDA approx. 5.8x), rising interest rates or changes in credit conditions could increase rollover costs and impair financial soundness. Long-term borrowings decreased by ▲48.0%, enlarging the maturity mismatch.
Worsening and volatility in International Business: International Business posted an Operating Loss of ¥23.6B (worsened ¥15.6B from prior year loss of ¥8.0B) and operating margin ▲6.5%, with elevated uncertainties including FX risk, country risk, and construction delays. This loss offset roughly 8% of consolidated operating profit, and without early margin recovery and project selection, it could be a downside risk to consolidated earnings.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.1% | 5.5% (3.5%–7.2%) | +1.5pt |
| Net Margin | 6.2% | 3.5% (2.5%–4.4%) | +2.7pt |
The company’s operating margin of 7.1% and net margin of 6.2% exceed industry medians, placing profitability at an upper level.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.0% | 9.8% (-2.1%–15.1%) | -1.9pt |
Revenue growth of 8.0% is slightly below the industry median of 9.8%, indicating growth pace is at a mid-level.
※ Source: Company compilation based on public financial statements
Improved margins in Domestic Architectural and Civil Engineering businesses raised the operating margin to 7.1% (up +1.3pt from 5.8%), and ROE improved to 12.0%. High profitability in the Asset Value-Added Business (operating margin 30.3%) has elevated company-wide profitability, and margin improvements in core construction operations and portfolio mix improvements mark a structural shift. Going forward, sustaining core margins (establishing price pass-through and advanced cost control) will be key.
Operating Cash Flow was ¥30.4B, only 0.12x of Net Income ¥244.3B, with increases in accounts receivable on completed contracts and work-in-progress payments absorbing cash. Short-term borrowings surged +53.7% to ¥658.6B, with short-term liabilities ratio 75.8% and D/E 2.36x, indicating high financial leverage. Normalization of working capital (collection progress) in the first half of the next fiscal year and extension of debt maturities are essential to maintain stable shareholder returns and financial health.
One-off gains (gains on sale of investment securities, etc.) temporarily boosted current Net Income by roughly ¥46B; next fiscal year guidance Net Income ¥195.0B (▲20.2%) incorporates the fall-off of these gains and is conservative. Correction of the International Business deficit (¥▲23.6B, worsened ¥15.6B YoY) and improvements in order intake and collection efficiency will be a litmus test of underlying performance next year.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult professionals as needed.