ASANUMA CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

Asanuma Corporation's Q1 of the fiscal year ending March 2027 was a case of declining revenue but rising earnings, with a substantial profit increase driven by improved profitability despite a decline in construction revenue. Revenue declined by double digits to ¥373.7B (previous year: ¥427.1B, YoY △12.5%), while Operating Income rose substantially to ¥16.9B (previous year: ¥11.1B, YoY +51.7%), Ordinary Income to ¥17.0B (previous year: ¥10.8B, YoY +56.9%), and Net Income to ¥11.4B (previous year: ¥7.2B, YoY +59.3%, based on consolidated net income attributable to the fiscal period). The primary drivers of earnings growth were an improvement in the gross profit margin on completed construction contracts and control of SG&A expenses. The gross profit margin increased by approximately 2.4pt from the previous year to 11.8%, while SG&A expenses were reduced to ¥2.73B (YoY △5.5%). Both extraordinary income and extraordinary losses were negligible, indicating that the earnings growth was attributable to improved profitability in the core business.

Factors Affecting Performance

【Revenue】Revenue declined to ¥373.7B, down YoY △12.5%. The core Construction segment led the overall decline, with revenue of ¥300.0B (80.3% of total, YoY △15.4%). Engineering was nearly flat at ¥64.9B (17.4%, YoY △0.1%), while Other posted a modest increase to ¥8.8B (2.4%, YoY +14.1%). The timing of progress in completed construction revenue (private-sector construction) had a significant impact. Although public-sector construction increased from the previous year, the decline in private-sector construction weighed on overall revenue.

【Profit and Loss】The improvement in the gross profit margin on completed construction contracts drove earnings growth. The company-wide gross profit margin improved by approximately 2.4pt to 11.8% from 9.4% in the previous year, while the gross profit margin on completed construction contracts rose to 11.5% from 9.0%. SG&A expenses were controlled at ¥2.73B (YoY △5.5%), lifting the Operating Income margin by approximately 1.9pt to 4.5% from 2.6%. Non-operating income and expenses amounted to ¥0.12B and ¥0.10B, respectively, resulting in a slight net positive contribution, and Ordinary Income of ¥17.0B slightly exceeded Operating Income. Extraordinary income and losses were both in the ¥0.0B range and negligible, indicating limited impact from temporary factors. In conclusion, this was a case of declining revenue but rising earnings, supported by improved profitability and cost control.

Segment Analysis

Construction generated revenue of ¥300.0B (YoY △15.4%), Operating Income of ¥3.44B (YoY +12.1%), and a margin of 11.5% (previous year: 8.9%). Despite lower revenue, the segment secured higher earnings through improved profitability and supported the majority of company-wide profit. Engineering was nearly flat, with revenue of ¥64.9B (YoY △0.1%), but improved its Operating Income to ¥0.76B (YoY +8.8%) and its margin to 11.7% (previous year: 10.5%). The Other segment (including maintenance and real estate) recorded revenue of ¥8.8B (YoY +14.1%), Operating Income of ¥0.16B (YoY +127.9%), and a margin of 17.6%, the highest profitability among all segments. Although small in scale, it made a significant contribution to earnings growth. Profit margins improved year over year across all segments, suggesting company-wide progress in enhancing project profitability.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 4.5% from 2.6% in the previous year, while the Net Income margin improved to 3.0% (based on net income attributable to owners of the parent; previous year: 1.7%). ROE was 2.3% (quarterly actual result, before annualization). Although the improvement in the Net Income margin contributed, the total asset turnover ratio remained low, leaving room for further improvement.【Cash Quality】Cash and deposits totaled ¥27.55B, an increase of +15.3% from the ¥2.389B level at the end of the previous year, while accounts receivable for completed construction contracts declined by △19.3% to ¥55.265B from ¥68.470B in the previous year, indicating progress in receivables collection.【Investment Efficiency】Investment securities totaled ¥7.46B (previous year: ¥7.79B), and goodwill was ¥0.77B, with no significant change in the asset composition. Total assets contracted to ¥108.64B from ¥118.18B in the previous year.【Financial Soundness】The Equity Ratio improved by +3.2pt to 45.3% from 42.1% in the previous year, while the current ratio remained high at 209.9% (current assets of ¥89.67B / current liabilities of ¥42.73B). Cash and deposits of ¥27.55B exceeded long-term borrowings of ¥12.40B and bonds of ¥0.39B. The Operating Income coverage ratio relative to interest expense of ¥0.07B was also high, indicating a sound financial position.

Cash Flow Analysis

Although the cash flow statement has not been disclosed, cash trends can be assessed from changes in the balance sheet. Cash and deposits totaled ¥27.55B, an increase of ¥3.66B (+15.3%) from ¥23.89B at the end of the previous year. Accounts receivable for completed construction contracts totaled ¥55.265B, down 19.3% from ¥68.470B at the end of the previous year, suggesting that collection of trade receivables was the primary source of the increase in cash. Meanwhile, costs on uncompleted construction contracts increased by +41.2% to ¥2.39B from ¥1.69B at the end of the previous year, indicating accumulated advance expenditures for construction in progress. Advances received on uncompleted construction contracts totaled ¥10.47B, nearly unchanged from ¥10.39B at the end of the previous year (+0.8%), indicating stable customer prepayments at the order stage. Overall, collection of trade receivables was the main source of cash generation, and cash efficiency in terms of working capital is improving.

Earnings Quality

The majority of profit was generated by the core business, with an extremely limited contribution from non-recurring items. Non-operating income was ¥0.12B, mainly consisting of dividend income of ¥0.06B, while non-operating expenses were ¥0.10B, mainly consisting of interest expense of ¥0.07B. The net contribution was minor, and Ordinary Income of ¥17.0B was nearly equal to Operating Income of ¥16.9B. Extraordinary income and extraordinary losses were both in the ¥0.0B range, with essentially no impact on earnings from temporary factors. Income before income taxes of ¥17.1B was reduced by income taxes of ¥5.7B (effective tax rate: 33.1%), resulting in Net Income of ¥11.4B (consolidated) and net income attributable to owners of the parent of ¥11.4B. Comprehensive income was ¥10.9B (¥10.8B attributable to owners of the parent), slightly below Net Income. This was due to other securities valuation difference of △¥0.23B, which offset increases of +¥0.12B in foreign currency translation adjustments and +¥0.06B in adjustments related to retirement benefits; this does not impair the quality of operating earnings. From an accrual perspective, the substantial decline in accounts receivable for completed construction contracts and the increase in cash confirm that the conversion of reported profit into cash is progressing favorably.

Earnings Forecast and Guidance

Progress against the full-year plan in Q1 was 21.3% for Revenue (¥373.7B/¥1755.0B), 21.7% for Operating Income (¥16.9B/¥77.8B), 22.6% for Ordinary Income (¥17.0B/¥75.3B), and 22.0% for Net Income (based on income attributable to owners of the parent) (¥11.4B/¥51.8B). Although all were below the simple benchmark of 25% for equal quarterly progress, construction companies typically experience seasonality in which construction handovers are weighted toward the second half. Taking this into account, progress can be assessed as within an acceptable range. The full-year plan assumes nearly flat revenue growth of +0.1%, while Operating Income is expected to increase by +7.9%. Whether the trend of improved profitability confirmed in Q1 can continue throughout the year will be key to achieving the plan.

Shareholder Returns

The full-year dividend forecast is ¥45.00, implying a Payout Ratio of approximately 70.1% against the company-plan EPS of ¥64.22. As of the current quarter, there has been no revision to the dividend forecast. Although the Payout Ratio is relatively high, the company has sufficient capacity to fund payments, given cash and deposits of ¥27.55B, low interest-bearing debt, and a high Equity Ratio of 45.3%.

Risk Factors

1. Segment concentration risk: The Construction segment accounts for 80.3% of Revenue, and trends in orders and profitability within this segment have a significant impact on company-wide performance. Engineering (17.4%) and Other (2.4%) are relatively small in scale.

2. Monitoring of profitability levels: Although the Operating Income margin of 4.5% and Net Income margin of 3.0% improved from the previous year, the Net Income margin is △0.7pt below the industry median (Operating Income margin: 4.5%, Net Income margin: 3.8%). It is necessary to monitor whether the trend of improving profitability can continue.

3. Working capital fluctuations: Accounts receivable for completed construction contracts declined to ¥55.265B during the current quarter, but costs on uncompleted construction contracts increased by +41.2% from the end of the previous year to ¥2.39B. Changes in advance expenditures associated with construction progress may affect future liquidity.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin is at the industry median, while the Net Income margin is slightly lower, potentially reflecting differences in tax burden or non-operating items.

Growth and Capital Efficiency

The Revenue growth rate is substantially below the industry median, and the delayed progress in completed construction revenue during the quarter is notable even within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The substantial increase in earnings despite declining revenue resulted from improvements in the cost structure, including an approximately 2.4pt improvement in the gross profit margin and a 5.5% reduction in SG&A expenses. The increase in profit margins across all segments suggests improved company-wide profitability management.

2. The 19.3% decline in accounts receivable for completed construction contracts and the 15.3% increase in cash and deposits indicate progress in collecting trade receivables and support the quality of cash conversion from reported earnings.

3. Although progress against the full-year plan was below the simple benchmark of 25%, at 21.3% for Revenue and 21.7% for Operating Income, the seasonality of the construction industry leaves room to achieve the full-year plan through concentrated construction handovers in the second half.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥625–¥660 at ±1% for the cost of equity, and ¥642–¥643 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference relative to 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 predict 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 disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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