| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1047.5B | ¥864.6B | +21.1% |
| Operating Income | ¥66.5B | ¥52.2B | +27.4% |
| Ordinary Income | ¥64.3B | ¥52.3B | +22.9% |
| Net Income | ¥42.5B | ¥35.7B | +19.3% |
| ROE | 7.8% | 7.2% | - |
The fiscal year ending March 2026 closed with revenue of ¥1,047.5B (YoY +182.9B, +21.1%), Operating Income of ¥66.5B (YoY +14.3B, +27.4%), Ordinary Income of ¥64.3B (YoY +12.0B, +22.9%), and Net Income of ¥42.5B (YoY +6.9B, +19.3%), delivering revenue and profit growth. The core Construction Business expanded significantly with Completed Contract Revenue of ¥1,011.4B (+21.2%), and operating margin improved by 0.3pt to 6.3% (prior year 6.0%). Gross profit margin on completed contracts declined to 13.5% from 14.1% (‑0.6pt), but SG&A ratio improved to 7.6% (‑1.1pt), enhancing operating-stage profitability. Operating Cash Flow (OCF) remained limited at ¥4.8B, as the increase in Completed Contract Accounts Receivable (+¥139.6B) tied up working capital; however, cash balance increased by ¥64.2B to ¥196.4B following short-term borrowings +¥32.9B and long-term borrowings +¥49.8B. ROE was maintained at 7.8% broadly in line with the prior year, but the company’s weak cash generation emerged as a key issue in this result.
[Revenue] Revenue reached ¥1,047.5B (+21.1%), achieving high growth. By segment, the Construction Business recorded ¥1,028.5B (+21.2%), accounting for 98.2% of the total, driven by Completed Contract Revenue of ¥1,011.4B (+21.2%). Completed contracts progressed steadily across marine civil engineering, land civil engineering, and building construction, and significant contributions from large projects produced strong top-line growth. The Real Estate Business contracted slightly to ¥4.8B (‑5.0%) but contributed with a high margin (Operating Income margin 52.8%). Other businesses (ship management, etc.) expanded to ¥15.1B (+31.5%). Total gross profit on completed contracts increased to ¥136.5B, but the completed contract gross margin fell to 13.5% (prior year 14.1%) due to rising material and subcontract costs and a project mix effect. Revenue from development and related businesses was ¥36.1B with a gross margin of 26.4% (prior year 28.4%), also showing a declining trend.
[Profitability] Operating Income grew to ¥66.5B (+27.4%), outpacing revenue growth. Despite the decline in completed contract gross margin, operating margin improved to 6.3% (prior year 6.0%) primarily due to a 1.1pt reduction in SG&A ratio (7.6% vs. 8.7% prior). SG&A was limited to ¥79.5B (+¥4.4B, +5.9%), reflecting dilution of fixed costs from revenue growth. Non-operating items comprised interest income ¥0.5B and dividend income ¥1.7B, while non-operating expenses of ¥5.0B (including interest expense ¥2.7B) outweighed these, resulting in Ordinary Income of ¥64.3B (+22.9%). Extraordinary gains/losses were net positive ¥0.5B (gain on sale of fixed assets ¥0.7B less loss on disposal of fixed assets ¥0.2B), producing profit before tax of ¥64.7B, income taxes of ¥20.2B, and Net Income of ¥42.5B (+19.3%). Net income attributable to owners of parent, excluding non-controlling interests of ¥0.9B, was ¥41.7B. In conclusion, the company achieved revenue and profit growth, with operating leverage supported by dilution of fixed SG&A.
The Construction Business reported revenue of ¥1,028.5B (+21.2%) and Operating Income of ¥84.0B (+18.3%), yielding an operating margin of 8.2% (prior year 8.4%). The slight decline in margin versus sales growth reflected compression of the completed contract gross margin to 13.5% (prior year 14.1%). Segment assets rose substantially to ¥814.4B from ¥619.7B, reflecting increases in working capital such as Completed Contract Accounts Receivable. The Real Estate Business posted revenue ¥4.8B (‑5.0%) and Operating Income ¥2.5B (+11.5%), maintaining a high margin of 52.8% (prior year 45.0%); segment assets were essentially flat at ¥77.1B. Other businesses recorded revenue ¥15.1B (+31.5%) and Operating Income ¥0.9B (‑23.7%), with profitability declining to 5.8% (prior year 9.9%). Aggregate segment profit before corporate expenses was ¥86.6B, and after corporate expenses of ¥20.9B, consolidated Operating Income amounted to ¥66.5B. Dependence on the Construction Business exceeds 98% for both revenue and profit, meaning project profitability and cost controls in that business drive overall results.
[Profitability] Operating margin was 6.3% (prior year 6.0%) and Net Income margin was 4.2% (prior year 4.1%), showing modest improvement and maintained core profitability. The decline in completed contract gross margin to 13.5% (prior year 14.1%) reflects higher material and subcontract costs, but this was offset by improvement in SG&A ratio to 7.6% (prior year 8.7%), securing higher operating profit. ROE was 7.8% (prior year 7.8%), flat and around industry average. ROA (on an Ordinary Income basis) improved slightly to 6.0% (prior year 5.7%). [Cash Quality] Operating Cash Flow/Net Income ratio was extremely low at 0.11x, as the rapid revenue expansion increased Completed Contract Accounts Receivable by ¥139.6B and strained working capital. Free Cash Flow (FCF) was ¥‑6.8B, and dividend payments of ¥16.2B were funded by external borrowings. OCF/EBITDA was a weak 0.06x, making next-period collection progress a precondition. [Investment Efficiency] Total asset turnover was 0.86x (prior year 0.94x), indicating deterioration in asset efficiency. Capital expenditures were ¥5.7B, below depreciation of ¥8.4B, with Capex/Depreciation ratio at 0.68x, indicating restrained capex. Intangible fixed assets increased by ¥5.9B to ¥11.0B, reflecting DX investments such as software. [Financial Soundness] Equity Ratio declined to 44.7% (prior year 52.6%) but remains within a healthy range. Debt/Equity ratio was 39.2% (interest-bearing debt ¥214.8B / equity ¥547.6B), not excessive, but short-term debt ratio is high at 75.1%, indicating dependence on short-term borrowings. Current ratio and quick ratio stand at 167%, providing good short-term liquidity. Interest coverage was 24.9x (Operating Income / interest expense), indicating strong ability to withstand interest burden.
Operating Cash Flow was ¥4.8B (improved from ¥‑102.1B prior), but only 0.11x relative to Net Income ¥42.5B, indicating weak cash conversion. Operating cash flow subtotal (before working capital changes) was ¥9.7B, including depreciation ¥8.4B, but core cash generation remained limited. Working capital changes were led by an increase in trade receivables of ¥‑139.6B, reflecting a sharp rise in Completed Contract Accounts Receivable as the main cash outflow. An increase in accounts payable of +¥51.2B partially offset this, but the scale of receivables growth and other asset changes of ¥‑71.1B resulted in a large net working capital cash outflow. After corporate tax payments of ¥‑4.3B, interest and dividend receipts of +¥2.2B, and interest payments of ‑¥2.8B, Operating Cash Flow closed at ¥4.8B. Investing Cash Flow was ‑¥11.6B, mainly due to capital expenditures ‑¥5.7B, acquisition of intangible fixed assets ‑¥6.5B, and acquisition of investment securities ‑¥1.1B. Proceeds from sale of fixed assets +¥2.4B partially offset these, leaving FCF at ‑¥6.8B. Financing Cash Flow saw a large inflow of +¥70.9B, sourced from long-term borrowings +¥75.0B and net increase in short-term borrowings +¥32.9B, net of long-term borrowings repayments ‑¥18.8B and dividend payments ‑¥16.1B. Cash and cash equivalents increased by +¥64.2B, bringing the ending balance to ¥196.4B. While the cash position was strengthened, the weak Operating Cash Flow highlights room to improve working capital management.
The difference between Ordinary Income ¥64.3B and Net Income ¥42.5B is primarily attributable to income taxes of ¥20.2B, and there is no major distortion in recurring earnings structure. Extraordinary items were net +¥0.5B (gain on sale of fixed assets ¥0.7B and loss on disposal ¥0.2B), so one-off effects were minor. Non-operating income of ¥2.8B comprised interest income ¥0.5B, dividend income ¥1.7B, and other ¥0.6B, reflecting stable returns from financial assets. Non-operating expenses of ¥5.0B were led by interest expense ¥2.7B and other ¥0.6B; borrowing interest burden is on an upward trend but not excessive. Comprehensive Income totaled ¥65.0B, significantly exceeding Net Income ¥42.5B, boosted by other comprehensive income items: valuation difference on available-for-sale securities ¥11.1B and actuarial gains/losses adjustments relating to retirement benefits ¥9.3B. The rise in valuation difference on securities reflects unrealized gains on investment securities of ¥84.3B (prior year ¥67.1B), improving equity quality. The low Operating Cash Flow (OCF/Net Income 0.11x) is a concern from an accruals perspective; recovery of Completed Contract Accounts Receivable and normalization of working capital are prerequisites for improving earnings quality. Core recurring earnings remain solid, but weak cash generation constrains the quality of this fiscal year’s results.
Full-year guidance is Revenue ¥1,160.0B (YoY +10.7%), Operating Income ¥71.0B (+6.8%), Ordinary Income ¥65.0B (+1.1%), and Net Income ¥43.0B (+1.1%). Compared with this period’s results, revenue achievement ratio is 90.2% (¥1,047.5B / ¥1,160.0B), Operating Income achievement ratio 93.6% (¥66.5B / ¥71.0B), Ordinary Income achievement ratio 98.9% (¥64.3B / ¥65.0B), and Net Income achievement ratio 98.8% (¥42.5B / ¥43.0B). Profitability is broadly on plan, but revenue fell short by about ¥112B, suggesting carryover of some projects to the next fiscal year. This likely reflects construction-period variability and shifts in completion timing typical of the Construction Business. The next fiscal year’s revenue growth forecast of +10.7%—slower than this year’s +21.1%—reflects a normalization after last year’s rapid expansion and leveling of project progress. Operating margin is projected at 6.1% (¥71.0B / ¥1,160.0B), a slight decrease from 6.3% this period, implying no material improvement in completed contract gross margin is assumed. The modest +1.1% growth in Ordinary and Net Income may incorporate expectations of higher interest expenses and tax normalization. The guidance lists dividends as 0 yen, but given this period’s dividend of ¥135 (payout ratio about 40%), this likely indicates an error or that dividends are undecided. Achievement of the forecast depends on smooth project completion from order backlog, recovery of completed contract gross margins, and working capital collections.
The year-end dividend for this period was ¥135 (interim dividend ¥0), yielding an annual dividend of ¥135 and a payout ratio of approximately 43.5% (based on basic EPS of ¥343.44). The prior year also paid an annual dividend of ¥135, indicating a stable dividend policy. Total dividend payments were approximately ¥16.2B, a reasonable level against Net Income of ¥42.5B. However, FCF was ‑¥6.8B and post-dividend effective FCF was ‑¥23.0B, meaning dividends were funded by external borrowings this period. Cash balance of ¥196.4B provides ample liquidity, but the Operating Cash Flow / Dividend ratio was only 0.30x, so sustainability depends on normalization of working capital. No share buyback was disclosed; shareholder returns were limited to dividends. A payout ratio in the 40% range is typical for the construction industry and balances retained earnings and growth investment. If Operating Cash Flow improves in future periods, scope for dividend increases or raising the Total Return Ratio may emerge, but maintaining current levels is realistic in the near term. An explicit dividend policy is not included in this document, though practice suggests a stance of sustaining stable dividends.
Risk of further decline in completed contract gross margin: Completed contract gross margin fell to 13.5% (‑0.6pt YoY). Rising material and subcontract costs and project mix shifts are pressuring gross margin; improvements in cost control precision and selection of high-margin projects are critical. Further deterioration in gross margin would make maintaining an operating margin of 6.3% difficult and delay ROE improvement. Allowance for construction losses is ¥1.1B (prior year ¥3.0B), decreased, but the risk of realization of unprofitable projects remains.
Working capital expansion and liquidity risk: Completed Contract Accounts Receivable increased by ¥139.6B YoY, and Operating Cash Flow/Net Income was a fragile 0.11x. While receivable growth may be temporary due to revenue expansion, prolonged collection delays or stalls in project progress could strain liquidity. Interest-bearing debt totaled ¥214.8B (short-term borrowings ¥161.2B and long-term borrowings ¥53.6B), with a high short-term dependence (75.1%), so refinancing risk should be monitored. Cash balance of ¥196.4B is sufficient for now, but delayed working capital normalization could necessitate additional borrowings or liquidity measures.
High dependence on the Construction Business and market fluctuation risk: The Construction Business accounts for 98.2% of revenue and the majority of operating profit, so business results are highly sensitive to public works tendering and private capital expenditures. Marine civil engineering, in particular, is vulnerable to weather and natural disasters, raising risks of schedule delays and additional costs. The Real Estate Business is high-margin but small-scale, so diversification benefits are limited. This report does not disclose backlog or order intake details, so transparency on future revenue visibility is somewhat constrained.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.3% | 5.5% (3.5%–7.2%) | +0.8pt |
| Net Income Margin | 4.1% | 3.5% (2.5%–4.4%) | +0.5pt |
Profitability exceeds the industry median, placing the company in the upper range for both operating and net margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 21.1% | 9.8% (-2.1%–15.1%) | +11.3pt |
Revenue growth significantly exceeds the industry median, indicating high growth within the sector.
※ Source: Company aggregation
The simultaneous achievement of high revenue growth (+21.1%) and improvement in operating margin to 6.3% (+0.3pt), while maintaining profitability above the industry median, is commendable. Conversely, the decline in completed contract gross margin to 13.5% (prior year 14.1%) reflects upward pressure on materials and subcontract costs, and continued cost management and selection of high-margin projects will be key to sustainable margin improvement.
The vulnerability of cash conversion is evident with Operating Cash Flow/Net Income at 0.11x; collection of Completed Contract Accounts Receivable and normalization of working capital are the top priorities for the next period. Although short-term debt dependence is high at 75.1% and refinancing and rising interest costs warrant attention, the cash balance of ¥196.4B and Interest Coverage of 24.9x provide a solid financial cushion. If working capital normalizes, achieving double-digit ROE and a positive FCF are within sight.
Revenue achievement versus guidance was 90.2%, suggesting some project carryover to the next fiscal year, but profits remained on plan, indicating absorption of schedule variations. The forecasted revenue growth deceleration to +10.7% from this period’s +21.1% reflects normalization after the prior rapid expansion and leveling of project progress, hinting at a transition toward a more sustainable growth trajectory. The payout ratio of 43.5% is reasonable, but dividend payments funded during an FCF deficit should be considered a temporary measure; continued shareholder returns will depend on improvement in Operating Cash Flow.
This report is an AI-generated financial analysis created from XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.