| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥7943.1B | ¥7274.9B | +9.2% |
| Operating Income / Operating Profit | ¥553.0B | ¥217.0B | +154.9% |
| Ordinary Income | ¥532.0B | ¥188.4B | +182.4% |
| Net Income / Net Profit | ¥316.3B | ¥108.2B | +192.3% |
| ROE | 15.9% | 6.3% | - |
The fiscal year ended March 2026 achieved significant revenue and profit growth with Revenue of 7,943B (YoY +668B +9.2%), Operating Income of 553B (YoY +336B +154.9%), Ordinary Income of 532B (YoY +344B +182.4%), and Net Income attributable to owners of the parent of 347B (YoY +224B +192.3%). Operating margin improved 4.0pt from 3.0% to 7.0%, and gross margin rose to 10.5% (prior year 6.5%). Recovery in profitability in the Domestic Civil Engineering and Building segments was the primary driver of profit improvement, while Overseas Construction reduced its loss by 79.3%. Non-operating items included foreign exchange gains of 15.9B, partly offset by interest expense of 35.5B, so incremental uplift at the Ordinary Income level was limited. Extraordinary items totaled -7.1B and were immaterial, indicating that recurring earnings now account for the bulk of profits. ROE rose materially to 15.9% (prior year 7.2%), reflecting simultaneous improvements in profitability and capital efficiency.
[Revenue] Revenue was 7,943B (YoY +9.2%), with all three segments achieving top-line growth. By segment, Domestic Civil Engineering was 3,262B (+6.1%) representing 41.1% of sales, Domestic Building was 2,734B (+7.4%) representing 34.4%, and Overseas Construction was 1,818B (+19.8%) representing 22.9%. Overseas Construction showed the highest sales growth, recording 1,730B in Southeast Asia (prior year 1,450B) and 88B in other regions (prior year 67B). Completed-contract revenue totaled 7,710B, accounting for 97.1% of total revenue, while other revenue was 233B (prior year 244B), a slight decline. Regionally, Domestic Japan was 6,113B (prior year 5,740B), Southeast Asia 1,730B, and Other Regions 88B, maintaining a domestic share of 77%.
[Profitability] Cost of sales was 7,110B (prior year 6,799B +4.6%), and gross margin improved 4.0pt to 10.5% (prior year 6.5%). The cost ratio for completed contracts fell 3.9pt to 89.8% (prior year 93.7%), reflecting notable margin recovery on domestic projects. SG&A was 280B (prior year 259B +8.3%), equivalent to 3.5% of sales (prior year 3.6%), a slight improvement. Operating Income reached 553B (prior year 217B +154.9%). Non-operating income was 26.4B, mainly foreign exchange gains of 15.9B and dividend income of 3.9B. Non-operating expenses were 47.5B, led by interest expense of 35.5B. Ordinary Income was 532B (prior year 188B +182.4%), driven by the large operating improvement. Extraordinary income/loss resulted in -7.1B (extraordinary gains 1.7B, including gain on sale of fixed assets 1.6B; extraordinary losses 8.8B, including impairment losses 5.4B), slightly reducing income from ordinary activities. Profit before income taxes was 525B (prior year 193B +172.4%); after income taxes of 178B (effective tax rate 34.0%), Net Income attributable to owners of the parent amounted to 347B (prior year 108B +192.3%). In conclusion, increased proportion of high-margin domestic civil engineering and building projects and reduced overseas losses delivered revenue and profit growth.
Domestic Civil Engineering posted Revenue of 3,262B (YoY +6.1%) and Operating Income of 402B (YoY +44.8%), improving operating margin to 12.3% (prior year 9.0%). As the core business accounting for 72.7% of consolidated Operating Income, project margin improvements were pronounced. Domestic Building recorded Revenue of 2,734B (+7.4%) and Operating Income of 168B (+86.7%), with an operating margin rising 2.6pt to 6.1% (prior year 3.5%), driven by better cost control. Overseas Construction delivered high top-line growth with Revenue of 1,818B (+19.8%) but an operating loss of 32B (prior year -156B), resulting in a -1.8% margin and continued loss. The loss amount narrowed 79.3% year-on-year, confirming an improving trend. Other segments (Domestic Development, Shipbuilding, etc.) had Revenue of 159B (-4.3%) and Operating Income of 15B (+194.0%), yielding an operating margin of 9.6%.
[Profitability] Operating margin improved to 7.0% (prior year 3.0%) (+4.0pt), and Net Profit Margin rose to 4.4% (prior year 1.5%) (+2.9pt). ROE was 15.9% (prior year 7.2%), primarily driven by improved net margin. ROA improved to 4.3% (prior year 1.6%), and total asset turnover remained stable at 1.00x (prior year 1.10x). EBITDA was 653B (EBITDA = Operating Income 553B + Depreciation 99B), giving an EBITDA margin of 8.2%. [Cash Quality] Operating Cash Flow / Net Income was 1.97x, indicating solid cash backing of profits. The accrual ratio was -4.3% (=(Net Income 347B - Operating CF 684B)/Total Assets 7,904B), a healthy level. OCF/EBITDA was 1.05x, indicating strong cash conversion. [Investment Efficiency] Capital expenditures were 959B, 9.66x depreciation, indicating a large-scale growth investment phase. Construction in Progress (CIP) was 932B (prior year 461B +102%), accounting for 43.3% of tangible fixed assets, showing accumulation of pre-operational investment. [Financial Soundness] Equity Ratio was 25.2% (prior year 26.1%), and D/E ratio was 2.97x (prior year 2.84x), indicating high leverage. Current ratio was 126% (prior year 128%), and quick ratio was 126% (prior year 128%), implying acceptable short-term liquidity. Debt/EBITDA multiple was 2.07x, within investment-grade range, and EBITDA interest coverage was 18.38x (=EBITDA 653B / Interest Expense 35.5B), showing strong interest-paying capacity. Cash / Short-term debt was 1.35x, securing liquidity on hand.
Operating CF was 684B (prior year -233B), achieving a large positive turnaround. Subtotal of operating CF was 757B (prior year -102B), including corporate taxes paid 47B and interest paid 35B. Changes in working capital were mainly an increase in advances received for construction-in-progress (+102B) and an increase in trade receivables (-71B), with contract advances contributing to operating CF uplift. Inventories increased by 10B and accounts payable decreased by 14B, so overall working capital efficiency improved. Investing CF was -663B (prior year -232B), driven mainly by capital expenditures of 959B. Large additions to tangible fixed assets and accumulation in CIP are reflected. Proceeds from sale of securities 2.5B and proceeds from sale of fixed assets 2.9B provided small offsets. Free Cash Flow (Operating CF + Investing CF) was 21B (prior year -465B), a small positive, but insufficient to cover total shareholder returns of 181B comprising dividends 81B and share buybacks 100B. Financing CF was 96B (prior year 439B), with inflows centered on long-term borrowings 349B and bond issuance 199B. Outflows included long-term borrowings repayment 98B, bond redemptions 100B, dividends 81B, and share buybacks 100B. Cash and cash equivalents rose 146B from beginning balance 568B to ending balance 714B, aided by 30B of foreign exchange gains. Depreciation was 99B, and the difference versus capex (959B) of 860B represents the net investment for the period, clearly funded by external financing.
Ordinary Income constitutes the bulk of earnings, and extraordinary items totaled -7.1B and were immaterial, indicating a high reliance on recurring income. Non-operating income was 26.4B (0.3% of sales), mainly foreign exchange gains 15.9B, dividend income 3.9B, and interest received 2.1B. Foreign exchange gains include transitory market-driven elements but are limited in scale. Non-operating expenses were 47.5B, with interest expense 35.5B (0.4% of sales) being the main component, reflecting fixed interest burden from higher borrowings. Operating CF was 1.97x Net Income, indicating strong cash conversion, and the accrual ratio of -4.3% is healthy. Normalization in working capital (increase in advances received for construction-in-progress, improved collection of receivables) contributed to operating CF, supporting high quality of earnings. Comprehensive income was 442B, 95B above Net Income of 347B. Components included valuation differences on available-for-sale securities 44B, retirement benefit adjustments 31B, and foreign currency translation adjustments 19B, reflecting accumulation of unrealized gains and valuation gains on risk assets. Goodwill amortization was minimal at 1.2B, about 0.2% of EBITDA, so comparability distortion with IFRS peers is limited.
Against the full-year guidance (Revenue 8,180B, Operating Income 590B, Ordinary Income 540B, Net Income 340B, EPS 129.88 yen, DPS 26 yen), results reached 97.1% of Revenue, 93.7% of Operating Income, 98.5% of Ordinary Income, and 93.0% of Net Income, indicating slight shortfalls mainly in operating lines. Continued losses in Overseas Construction, increased interest expense, and fixed asset-related costs at year-end likely affected performance. On the other hand, dividends amounted to 48 yen (interim 17 yen + year-end 31 yen), far exceeding the guidance of 26 yen, reflecting strengthened shareholder returns in line with performance recovery. Compared to the prior year guidance of Revenue +3.0%, Operating Income +6.7%, Ordinary Income +1.5%, Net Income +7.5%, actual results exceeded expectations substantially with Revenue +9.2%, Operating Income +154.9%, Ordinary Income +182.4%, and Net Income +192.3%, driven by better-than-expected margins on domestic projects and reduced overseas losses.
Annual dividend was 48 yen (interim 17 yen + year-end 31 yen, prior year 12 yen), a fourfold increase. Payout Ratio was 54.5% (= Total Dividends 81B / Net Income attributable to owners of the parent 347B ※including dividends to trust accounts), considered sustainable. Additionally, share buybacks of 100B were conducted, and combined with dividends of 81B, total shareholder return was 181B, implying a Total Return Ratio of about 52%. Free Cash Flow was only 21B, so FCF coverage was 0.15x (= FCF 21B / Dividends + Share Buybacks 181B), indicating shareholder returns exceeded internally generated cash. External financing (bonds and borrowings) supplemented payout funds; hence, continued CIP commissioning and recovery in Operating CF are key to sustaining returns. Dividend yield on an actuals basis is approximately 2.0% (assumed share price 2,400 yen), and a payout ratio of 54.5% is assessed as balancing growth investment and returns.
Risk of delay in transferring Construction in Progress (CIP) to fixed assets: CIP has accumulated to 932B (43.3% of tangible fixed assets). If commissioning is delayed or differs from initial assumptions, deferred depreciation and insufficient absorption of fixed costs could deteriorate profitability. Monitoring commissioning progress and investment recovery pace is necessary.
Interest rate risk due to high leverage: With a D/E ratio of 2.97x, rising interest rates could increase interest expenses and pressure Ordinary Income. Interest expense this period was 35.5B, but increases in long-term borrowings +235B and bonds +99B imply higher interest burden going forward. Although Debt/EBITDA 2.07x and interest coverage 18.38x indicate current resilience, delays in investment recovery or declines in Operating CF would make leverage management a challenge.
Profit volatility in Overseas Construction: Overseas Construction accounts for 1,818B (22.9% of consolidated revenue) and recorded an operating loss of 32B (margin -1.8%). Although the loss narrowed 79.3% year-on-year, profitability remains unstable due to region and project mix and exchange rate volatility; unexpected additional costs could exert downward pressure on consolidated profits.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.0% | 5.5% (3.5%–7.2%) | +1.4pt |
| Net Profit Margin | 4.0% | 3.5% (2.5%–4.4%) | +0.5pt |
Both operating margin and net profit margin exceed industry medians, demonstrating competitive advantage from improved margins in domestic civil engineering and building.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 9.2% | 9.8% (-2.1%–15.1%) | -0.7pt |
Revenue growth is close to the industry median, benefiting from the broader recovery in construction industry order conditions.
※ Source: Company compilation
Margin improvements in Domestic Civil Engineering and Building pushed Operating Margin to 7.0% (prior year 3.0%) and ROE to 15.9%, substantially improving capital efficiency. Operating CF / Net Income of 1.97x indicates strong cash backing of profits, confirming expansion of recurring earnings. Overseas Construction narrowed losses by 79.3%; turning it profitable in subsequent periods would be an upside driver for consolidated profits.
CIP has grown to 932B (43.3% of tangible fixed assets), indicating the company is in the final stages of a large-scale growth investment phase. Timing of commissioning and the contribution to earnings will be focal in coming periods; building a project portfolio that can cover increased depreciation is key. While leverage is high at D/E 2.97x, Debt/EBITDA 2.07x and EBITDA interest coverage 18.38x show strong interest-paying capacity, and if investment recovery proceeds as planned, financial soundness can be maintained.
The company strengthened shareholder returns with dividends of 48 yen (prior year 12 yen, fourfold) and executed share buybacks of 100B. Although the Total Return Ratio is about 52%, FCF coverage is 0.15x and internally generated cash is insufficient; recovery of Operating CF and a dividend-centric sustainable return policy are conditions for improving this balance.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as appropriate.