| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1213.3B | ¥1265.8B | -4.1% |
| Operating Income | ¥57.9B | ¥50.1B | +15.4% |
| Ordinary Income | ¥60.0B | ¥52.1B | +15.2% |
| Net Income | ¥21.3B | ¥29.4B | -27.3% |
| ROE | 3.9% | 5.2% | - |
For the fiscal year ended March 2026, Toa Road Corporation reported revenue of ¥1213.3B (YoY -¥52.5B -4.1%), Operating Income of ¥57.9B (YoY +¥7.8B +15.4%), Ordinary Income of ¥60.0B (YoY +¥7.9B +15.2%), and Net Income attributable to owners of the parent of ¥21.3B (YoY -¥8.1B -27.3%), resulting in year-over-year lower revenue but higher operating profit. The revenue decline reflected a -4.0% decrease in the Construction Business and -4.4% in the Manufacturing, Sales & Environmental Business, both impacted by adjustments to project and shipment volumes. Gross profit increased to ¥145.2B (+7.7%), and gross margin improved to 12.0% (+1.3pt). Operating margin improved to 4.8% (+0.8pt), with SG&A ratio contained at 7.2%, securing operating-level profit growth. However, the recognition of extraordinary losses of ¥7.0B (of which impairment losses were ¥6.8B) suppressed profit before tax to ¥55.0B, and final profit declined -27.3% YoY. By segment, Construction Business operating income was ¥44.1B (+15.6%, margin 5.9%) and Manufacturing, Sales & Environmental Business was ¥38.4B (+10.7%, margin 8.0%), both achieving double-digit profit growth as a result of selective, margin-focused project selection. Operating Cash Flow was substantially improved to ¥122.0B (YoY +795.8%), Free Cash Flow was ¥98.7B, and cash and deposits increased to ¥139.1B (+13.0%).
[Revenue] Revenue was ¥1213.3B (YoY -¥52.5B -4.1%). Construction Business revenue was ¥743.1B (-4.0%) as a decline in completed-construction revenue weighed, and Manufacturing, Sales & Environmental Business revenue was ¥478.8B (-4.4%) with shipment adjustments of asphalt mixtures and others impacting results. Both segments saw declines in project and sales volumes, but the revenue mix remained balanced with Construction 61.2% and Manufacturing/Sales 39.5% (before inter-segment elimination). Completed contract receivables were large at ¥303.1B (YoY +¥62.8B), as billing progress concentrated collections toward the fiscal year-end, leading receivables to build up despite lower revenue. The revenue decline reflects margin-focused project selection amid elevated materials and labor costs and a lull in large-scale projects.
[Profitability] Gross margin improved significantly to 12.0% (prior 10.7% +1.3pt), and gross profit rose to ¥145.2B (+7.7%). Progress on passing through price increases and improved project mix allowed gross profit expansion despite lower revenue. SG&A increased to ¥87.4B (+3.1%) but the SG&A ratio was contained at 7.2%, yielding Operating Income of ¥57.9B (+15.4%) and an operating margin of 4.8% (+0.8pt YoY). Non-operating net was +¥2.1B, mainly the difference between dividend income ¥1.5B and interest expense ¥0.5B. Ordinary Income was ¥60.0B (+15.2%), maintaining improvements seen at the operating level. Extraordinary items were net -¥4.9B; impairment losses of ¥6.8B (Construction ¥1.4B, Manufacturing/Sales ¥5.4B) pressured profits and could not be fully offset by special gains such as gains on sales of investment securities ¥1.2B (total special gains ¥2.1B). Profit before tax was ¥55.0B (-12.0%), and after income taxes of ¥19.7B (effective tax rate 35.8%) and non-controlling interests of ¥1.1B, Net Income attributable to owners of the parent was ¥21.3B (-27.3%). The divergence between Ordinary Income and Net Income stems primarily from the one-off impairment losses; the improvements at operating and ordinary levels are evident. In conclusion, the pattern is lower revenue with higher operating and ordinary profits but lower final profit due to the temporary impairment; excluding the impairment, profitability shows an improving trend.
The Construction Business recorded revenue of ¥743.1B (YoY -4.0%), Operating Income of ¥44.1B (+15.6%), and margin of 5.9% (prior 4.9% +1.0pt), reflecting substantial margin improvement. Despite reduced project volume, margin expansion was driven by restraint on low-margin projects and strengthened pricing negotiation. An impairment loss of ¥1.4B was recorded, but operating income growth outpaced this impact. The Manufacturing, Sales & Environmental Business reported revenue of ¥478.8B (-4.4%), Operating Income ¥38.4B (+10.7%), and margin 8.0% (prior 7.0% +1.0pt), maintaining high margins. Improved selling prices for asphalt mixtures and rigorous cost control offset volume declines. An impairment loss of ¥5.4B was recorded as profitability of manufacturing assets and logistics assets was reassessed. Both segments improved margins under shrinking revenue, indicating the margin-focused management policy has taken hold.
[Profitability] Operating margin improved markedly to 4.8% (prior 4.0% +0.8pt). Gross margin was 12.0% (prior 10.7% +1.3pt) and gross profit was ¥145.2B (+7.7%), expanding gross profit despite lower revenue, reflecting price pass-through and project selection. SG&A ratio was contained at 7.2%, and fixed cost absorption was favorable. ROE was 3.9%, down YoY, primarily due to Net Income being compressed by impairment. Considering the operating and ordinary improvements, operating strength is on a recovery trend. [Cash Quality] Operating Cash Flow (OCF) of ¥122.0B is 5.73x Net Income of ¥21.3B, indicating very strong cash backing of profits. From OCF subtotal ¥141.9B, after subtracting corporate tax payments ¥21.1B, the collection of receivables +¥62.8B contributed significantly. High pre-working-capital CF levels highlight strong cash generation. The accrual ratio (Net Income - OCF / Total Assets) is -11.4%, indicating cash generation exceeds accounting profits, a high-quality earnings structure. [Investment Efficiency] Capital expenditures were ¥25.2B, exceeding depreciation ¥22.9B, with a capex/depreciation ratio of 1.10x, reflecting ongoing renewal and efficiency investments. Free Cash Flow was ample at ¥98.7B, covering capex and shareholder returns (dividends + share buybacks approx. ¥47B). [Financial Soundness] Equity Ratio was 62.2% (prior 62.7%), remaining high. Interest-bearing debt (short-term borrowings ¥44.9B + long-term borrowings ¥1.4B) totaled ¥46.3B, only 5.2% of total assets. Current ratio was 188.8%, quick ratio 185.0%, indicating ample liquidity. With cash and deposits of ¥139.1B versus short-term borrowings ¥44.9B, net cash was +¥94.2B. Long-term borrowings were compressed to ¥1.4B (prior ¥4.5B -68.2%), further strengthening financial conservatism. Debt/EBITDA (interest-bearing debt/EBITDA) was very low at 0.57x, and interest burden is minimal.
Operating Cash Flow was ¥122.0B (prior ¥-17.5B, a large improvement). From OCF subtotal ¥141.9B, after corporate tax payments ¥21.1B, changes in working capital contributed significantly. Receivable collections of +¥62.8B were the largest inflow, reflecting progress in collecting completed contract receivables during the period. Advances received on uncompleted construction (contract liabilities) were ¥17.8B (YoY +¥8.1B), providing cash prior to project commencement. Conversely, uncompleted contract expenditures increased to ¥17.7B (+¥5.1B), but the rise in advances absorbed this, and the net working capital effect was positive. Inventory change was -¥0.9B, effectively neutral, and trade payables were -¥0.3B, a small decrease; receivable collections dominated, resulting in net cash inflow. Investing Cash Flow was -¥23.3B, led by capital expenditures -¥25.2B, primarily for tangible fixed assets focused on renewal and efficiency investments. Proceeds from fixed asset sales were ¥0.8B and from sales of investment securities ¥1.9B, limited in scale, with investment focused on maintaining business assets. Financing Cash Flow was -¥82.7B, driven by dividend payments -¥62.4B (to owners of the parent), share buybacks -¥5.2B, and long-term borrowings repayments -¥4.7B. Short-term borrowings were net repaid by -¥10.0B, compressing interest-bearing debt. Free Cash Flow was ¥98.7B (OCF ¥122.0B + Investing CF -¥23.3B), sufficiently covering dividends, share buybacks and debt repayments, and cash equivalents increased by ¥16.0B. OCF/Net Income was 5.73x, and OCF/EBITDA (Operating Income + Depreciation) was 1.51x, indicating very high cash conversion of profits and high quality of earnings.
Ordinary Income was ¥60.0B versus Net Income ¥21.3B, a wide divergence driven primarily by extraordinary losses of ¥7.0B (of which impairment losses ¥6.8B). Impairments were ¥1.4B in Construction and ¥5.4B in Manufacturing, Sales & Environmental businesses, treated as temporary costs associated with reassessing asset profitability. Special gains were limited at ¥2.1B (gains on sales of investment securities ¥1.2B, gains on sales of fixed assets ¥0.5B) and fell sharply from prior-year special gains of ¥11.7B (investment securities ¥6.7B, fixed assets ¥5.0B), with the reduction in special gains also pressuring final profit. Non-operating income was ¥3.2B, mainly dividend income ¥1.5B, functioning as a recurring source. Non-operating expenses were ¥1.1B (interest expense ¥0.5B, etc.), minor and indicating low and stable financial costs. Comprehensive income was ¥46.6B: Net Income ¥21.3B plus other comprehensive income including valuation differences on securities ¥5.4B and adjustments related to retirement benefits ¥5.8B, totaling other comprehensive income ¥11.2B. Valuation gains on securities suggest unrealized gains in the portfolio and accumulated realizable valuation gains. The ratio of OCF ¥122.0B to Net Income ¥21.3B is 5.73x, and the accrual (Net Income - OCF) is -¥100.7B, substantially negative, indicating cash substantially exceeds accounting profit and reflecting a high-quality earnings structure. The increases in ordinary and operating profitability and strong cash flow indicate performance improvements on a fundamental basis, and excluding temporary items such as impairments, earnings sustainability is assessed as high.
Full year guidance projects Revenue ¥1300.0B (vs prior year +¥86.7B +7.1%), Operating Income ¥60.0B (+¥2.1B +3.7%), Ordinary Income ¥61.0B (+¥1.0B +1.7%), and Net Income attributable to owners of the parent ¥42.0B (+¥20.7B +97.2%), indicating revenue growth with modest profit increases. Progress rates are Revenue 93.3%, Operating Income 96.5%, Ordinary Income 98.4%, and Net Income 50.7%; operating and ordinary stages have largely met the initial plan, but final profit fell short due to one-off losses like impairments. The full-year Net Income assumption of ¥42.0B factors in the dissipation of temporary losses, with expectations of concentration of large project completions in the second half and a recovery in shipments in the Manufacturing/Sales business. The outlook for operating margin is 4.6% (current year 4.8%), assuming some decline and reflecting a conservative guidance that incorporates potential cost increases in the second half. Revenue recovery (+7.1%) is greater than projected operating income growth (+3.7%), indicating continued emphasis on margin-focused operations over scale expansion.
A year-end dividend of ¥90 per share (full year ¥90) is planned, implying a payout ratio of 121% against Net Income ¥21.3B (EPS ¥74.24). There is no increase in dividends YoY; the policy is to maintain stable dividends. Given cash and deposits ¥139.1B and Free Cash Flow ¥98.7B, dividend-paying capacity is considered sufficiently high. Total dividends are approximately ¥41.5B (calculated on 46,208 thousand shares outstanding after deducting 4,187 thousand treasury shares from 50,395 thousand issued shares), representing 42.0% of Free CF. Share buybacks of ¥5.2B were executed, bringing total return (dividends + buybacks) to approximately ¥46.7B. The Total Return Ratio is 219% ((dividends + buybacks) / Net Income), an extremely high level where returns exceed profit on a profit basis, but sustainability is currently supported by strong cash generation (OCF ¥122.0B). However, if the full-year Net Income forecast ¥42.0B (EPS ¥90.89) is used and the dividend of ¥90 is maintained, the payout ratio would be approximately 99%, leaving limited tolerance for profit volatility. Balancing retained earnings and preserving capacity for growth investment will be an ongoing issue.
Project margin deterioration risk: With persistent inflationary pressure on materials and labor, mismatches in fixed-price contracts could compress gross margins. While gross margin improved to 12.0% (+1.3pt) this period, delays in passing through higher input costs or intensifying competition could erode margins. Allowance for construction losses is ¥0.6B (prior ¥1.1B -46.5%), reduced, but continued management of large project margins remains critical.
Concentration of short-term debt risk: Of interest-bearing debt ¥46.3B, short-term borrowings ¥44.9B account for 97%, raising a formal concern about within-year maturity concentration. Strong cash and deposits ¥139.1B and robust OCF suggest high refinancing ability, but in the event of rapid financial market changes, refinancing costs may rise or funding constraints may materialize. While the compression of long-term borrowings reflects conservative financial management, liquidity management given short-term dependence requires attention.
Risk of recurring impairments: This period recorded impairment losses of ¥6.8B (Construction ¥1.4B, Manufacturing/Sales ¥5.4B) as asset profitability reviews progressed. Declines in plant/equipment utilization or market deterioration in the Manufacturing, Sales & Environmental business could trigger additional impairments. Among investment securities ¥48.6B (YoY +¥7.7B), realized valuation losses could emerge, and continued portfolio review of fixed assets ¥235.1B could lead to further one-off losses that impair profits.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.8% | 5.5% (3.5%–7.2%) | -0.8pt |
| Net Margin | 1.8% | 3.5% (2.5%–4.4%) | -1.8pt |
Operating margin is 0.8pt below the industry median of 5.5%, and net margin at 1.8% is 1.8pt below the median 3.5%. One-off items such as impairments are weighing on net margin, but the trend of improving operating margin (prior 4.0% → current 4.8%) suggests a recovery in competitive positioning within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -4.1% | 9.8% (-2.1%–15.1%) | -14.0pt |
Revenue growth of -4.1% is 14.0pt below the industry median +9.8%, placing the company in the lower tier for growth. The volume adjustment driven by margin-focused project selection is the main cause, and this can be viewed as a transition phase of a margin-improvement strategy at the expense of scale.
※ Source: Company compilation
Profitability improvement under lower revenue is evident: operating margin rose to 4.8% (prior 4.0% +0.8pt) and gross margin to 12.0% (prior +1.3pt). Price pass-through and project selection effects are visible, and the margin-focused strategy amid scale reduction is effective. Operating Cash Flow of ¥122.0B is 5.73x Net Income, indicating very strong cash backing and high quality of earnings. Although one-off losses such as impairments of ¥6.8B compressed Net Income, improvements at operating and ordinary levels are clear, and the full-year guidance expects a substantial recovery in Net Income as temporary factors abate.
Financial soundness is high: Equity Ratio 62.2%, interest-bearing debt ¥46.3B (5.2% of total assets), Debt/EBITDA 0.57x, maintaining extremely conservative leverage. With cash and deposits ¥139.1B versus short-term borrowings ¥44.9B, net cash is +¥94.2B. Long-term borrowings were compressed to ¥1.4B, enhancing resilience to rising interest rates. Free Cash Flow ¥98.7B sufficiently covers capex and shareholder returns, limiting liquidity risk. Although a formal maturity concentration concern exists with 97% of debt being short-term, strong cash generation materially reduces refinancing risk.
This report is a financial analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are company-compiled reference information based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary before making investment decisions.