| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2522.6B | ¥2572.0B | -1.9% |
| Operating Income / Operating Profit | ¥180.4B | ¥161.8B | +11.4% |
| Ordinary Income | ¥189.0B | ¥173.0B | +9.2% |
| Net Income / Net Profit | ¥103.3B | ¥119.9B | -13.8% |
| ROE | 6.6% | 8.1% | - |
FY ending March 2026 full-year results: Revenue ¥2,522.6B (YoY -¥49.5B -1.9%), Operating Income ¥180.4B (YoY +¥18.6B +11.4%), Ordinary Income ¥189.0B (YoY +¥16.0B +9.2%), Net Income ¥103.3B (YoY -¥16.6B -13.8%). Revenue declined slightly, but gross margin improved to 16.9% (prior year 15.4%) up +1.5pt, driving an Operating Margin of 7.2% (prior year 6.3%) up +0.9pt. Profitability held firm through the ordinary income stage, but Net Income declined due to recognition of Special Losses ¥30.8B (impairment of goodwill special loss ¥20.2B, impairments ¥9.6B, etc.). This was a revenue-decline yet profit-increase result, with operational profitability improvement being a positive, while the one-off items that reduced final profit and deterioration in working capital leading to a decrease in Operating Cash Flow (OCF) ¥66.4B, YoY -56.0% remain issues.
[Revenue] Revenue was ¥2,522.6B (-1.9%), a slight decline. The core Equipment Construction Business segment (sales composition 93.9%) recorded ¥2,490.7B (-2.0%) and remained roughly flat year-on-year, while Other segments (leasing, security, real estate, etc.) grew to ¥161.1B (+3.2%). On a completed-construction basis, revenue was ¥2,278.9B, slightly down YoY, reflecting a temporary pause in the order environment. The main reason for the revenue decline is presumed to be timing shifts in large projects rather than structural demand deterioration.
[Profit & Loss] Cost of Sales was ¥2,096.7B (cost ratio 83.1%, prior year 84.6%) improving -1.5pt, expanding Gross Profit to ¥425.9B (gross margin 16.9%). Gross margin improvement is attributed to optimization of project mix and cost controls on materials and subcontracting. SG&A was ¥245.5B (SG&A ratio 9.7%, prior year 9.1%) up ¥1.2B, and SG&A ratio worsened +0.7pt due to higher fixed-cost burden amid revenue decline. Increased goodwill amortization of ¥22.4B (prior year ¥3.5B) was the main driver pushing up SG&A. As a result, Operating Income reached ¥180.4B (Operating Margin 7.2%), up +11.4%. Non-operating items contributed net +¥8.6B (dividends received ¥7.8B, securities interest ¥3.2B, etc.), bringing Ordinary Income to ¥189.0B (+9.2%). Extraordinary items were a net loss of -¥30.7B; within Special Losses ¥30.8B, goodwill amortization special loss ¥20.2B and impairment losses ¥9.6B were the main components. Pre-tax income declined to ¥158.4B (prior year ¥172.6B), and after corporate taxes ¥55.1B (effective tax rate 34.8%), Net Income was ¥103.3B (-13.8%). While the pattern is revenue down but operating profit up, the one-off special losses caused a decline in final profit.
The Equipment Construction Business segment posted Revenue ¥2,490.7B (-2.0%), Operating Income ¥173.3B (+12.7%), with a margin of 7.0%. Despite a slight revenue decline, margin improved +0.9pt from 6.1% due to higher gross margin and cost management. The Other segments (leasing, security, real estate, manufacturing, waste processing, power sales) had Revenue ¥161.1B (+3.2%), Operating Income ¥8.0B (-8.6%), margin 5.0%. Despite revenue growth, profitability declined and margin fell -0.6pt from 5.6% prior. Raising profitability across these businesses remains a challenge. The Equipment Construction Business accounts for 96.1% of consolidated Operating Income, indicating high concentration; profitability of projects in this segment will materially affect consolidated performance.
[Profitability] Operating Margin 7.2% (prior year 6.3%, +0.9pt), Net Margin 4.1% (prior year 4.7%, -0.6pt), ROE 6.6% (prior year 8.3%). Operating-stage profitability improved, but Net Margin declined due to Special Losses. ROE deteriorated -1.7pt YoY due to lower Net Income and increased equity. EBITDA ¥225.7B (Operating Income ¥180.4B + Depreciation ¥45.3B) with EBITDA margin 8.9%. [Cash Quality] Operating Cash Flow ¥66.4B vs Net Income ¥103.3B gives OCF/NI ratio 0.64x, indicating reduced conversion of earnings to cash due to working capital deterioration. OCF/EBITDA ratio 0.29x, a significant deterioration YoY. Accrual ratio (Net Income - OCF)/Total Assets is 1.6%, low, indicating stable accounting earnings quality. [Investment Efficiency] Total Asset Turnover 1.10x (prior year 1.10x) flat. Capital expenditure ¥49.2B vs Depreciation ¥45.3B yields Investment/Depreciation ratio 1.09x, slightly above maintenance level. ROA (based on Ordinary Income) improved to 8.2% from 7.4%. [Financial Soundness] Equity Ratio 67.9% (prior year 63.2%, +4.7pt) increased; Interest-bearing debt ¥82.8B, Debt/Equity 5.3%, Debt/EBITDA 0.37x, extremely conservative. Current Ratio 279%, Quick Ratio 279% indicating ample short-term liquidity. Cash and deposits ¥420.9B vs Short-term borrowings ¥28.7B, Cash/Short-term Liabilities ratio 14.7x. Interest Coverage (EBITDA/Interest Expense) exceeds 600x, indicating negligible interest burden.
Operating Cash Flow was ¥66.4B (prior year ¥150.8B, -56.0%) a large decline. Operating CF subtotal (before working capital changes) was ¥124.8B and remained firm, but a major headwind was reduction in accounts payable -¥184.0B (increased payments for accounts payable and electronic recorded obligations). Trade receivables decreased +¥53.8B contributing cash inflow, but an increase in uncompleted-construction deposits equivalent to advance receipts +¥28.3B could not offset the accounts payable decrease, lowering overall working capital and thus OCF. Corporate tax payments -¥63.2B were also a cash outflow factor. Investing Cash Flow was -¥59.1B, mainly capital expenditure -¥49.2B and intangible assets purchases -¥6.5B. Free Cash Flow was ¥7.3B (OCF + Investing CF), substantially reduced YoY. Financing Cash Flow was -¥54.7B, including dividend payments -¥55.4B, borrowings +¥36.0B from long-term loans, repayments -¥25.3B, etc. Cash decreased -¥46.1B during the period; year-end cash and deposits were ¥420.9B (prior year-end ¥337.7B) and cash equivalents including securities ¥430.8B (including securities ¥51.9B). OCF/Net Income ratio 0.64x and OCF/EBITDA 0.29x highlight weakened cash generation, making normalization of working capital management a focal point for next fiscal year.
The recurring earnings base is solid with Operating Income ¥180.4B (Operating Margin 7.2%), and non-operating items contributed net +¥8.6B. Non-operating income total ¥10.5B comprised mainly of dividends received ¥7.8B, securities interest ¥3.2B, foreign exchange gains ¥1.9B, etc., indicating stable income from financial asset management. Non-operating expenses were minor at ¥1.9B (interest expense ¥0.3B, foreign exchange losses ¥1.2B, etc.). Non-operating items are 0.3% of Revenue, so reliance on core business earnings is high. One-off item Special Losses ¥30.8B (goodwill amortization ¥20.2B, impairment losses ¥9.6B, loss on disposal of fixed assets ¥0.0B, etc.) were recorded, reducing pre-tax income from Ordinary Income ¥189.0B to Pre-tax Income ¥158.4B (-¥30.7B). The goodwill amortization special loss appears to be a one-time processing due to restructuring of subsidiaries, and impairments are non-cash charges from reassessment of asset profitability. The effective tax rate 34.8% is standard. Accrual quality is good (accrual ratio 1.6%), but OCF/Net Income ratio 0.64x indicates cash conversion is slowed by working capital deterioration, leaving short-term questions about cash backing of earnings.
Full-year guidance: Revenue ¥2,730.0B (YoY +8.2%), Operating Income ¥189.0B (YoY +4.8%), Ordinary Income ¥195.0B (YoY +3.2%), Net Income ¥132.0B (YoY +27.8%), EPS ¥192.20. Compared to current results, this requires increases of Revenue +¥207.4B, Operating Income +¥8.6B, Ordinary Income +¥6.0B, Net Income +¥28.7B. Revenue growth assumption +8.2% presumes order recovery and normalization of project progress, with Operating Margin assumed to moderate to 6.9% (current 7.2%). The large increase in Net Income (+27.8%) anticipates smoothing of Special Losses and a lower effective tax rate; achieving this depends on reduction of one-off losses. Dividend forecast is ¥39.00 (reduction from ¥72.00 this period), with forecasted Payout Ratio 20.3%, reflecting a conservative stance. Progress rate is not disclosed, but achieving the full-year plan requires revenue and profit accumulation in H2 and improvement in working capital.
This period’s annual dividend was ¥72.00 (interim ¥36.00, year-end ¥36.00), unchanged from prior year. Payout Ratio was 48.2% (total dividends approx. ¥49.8B against Net Income ¥103.3B), mid-range. Free Cash Flow was only ¥7.3B, well below total dividends, resulting in FCF coverage of 0.15x and dividends funded from cash on hand. Share buybacks were negligible (¥0.01B), so total returns were effectively dividend-centric. With cash on hand ¥420.9B and low leverage (Debt/Equity 5.3%), short-term dividend continuity capacity is high, but sustainability depends on recovery of Operating Cash Flow. Next fiscal year’s forecast dividend ¥39.00 (forecast payout ratio 20.3%) is a dividend cut but can be interpreted as a stable dividend policy based on conservative earnings outlook. Dividend policy shows DOE (Dividend on Equity) around 1.7%, low, indicating preference for internal reserves over distribution.
Working Capital Management Risk: This period Operating Cash Flow was halved to ¥66.4B due to a large reduction in accounts payable (-¥184.0B), causing OCF/EBITDA ratio to fall to 0.29x and severely reducing cash conversion. Unbilled completed-contract receivables (Completed-Construction Unbilled Receivables) ¥832.1B (33.0% of Revenue) are high; delays in collection timing or project elongation could pressure liquidity. If normalization of working capital is delayed, FCF coverage of dividends may remain insufficient and financial flexibility could deteriorate.
Segment Concentration Risk: The Equipment Construction Business accounts for 93.9% of Revenue and 96.1% of Operating Income, meaning project mix or profitability deterioration of large projects could materially hit consolidated results. Rising material, labor, or subcontracting costs could rapidly compress gross margins; while construction loss reserves are ¥2.4B (prior year ¥3.8B) having decreased, the risk of emerging unprofitable projects remains.
Recurrence Risk of Special Losses: This period recorded Special Losses ¥30.8B (goodwill amortization ¥20.2B, impairment losses ¥9.6B), reducing Net Income by -29.8%. Intangible asset balance has shrunk to ¥31.1B (prior year ¥67.1B) but additional impairment risk remains if subsidiary/affiliate profitability weakens or further restructuring occurs. Inadequate monitoring of fixed-asset profitability could increase earnings volatility through future special losses.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.2% | 5.5% (3.5%–7.2%) | +1.6pt |
| Net Margin | 4.1% | 3.5% (2.5%–4.4%) | +0.6pt |
Both Operating Margin and Net Margin exceed industry medians, placing profitability in the upper tier within the construction industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.9% | 9.8% (-2.1%–15.1%) | -11.8pt |
Revenue growth lags the industry median significantly, with timing differences in project progress dragging down growth metrics.
※ Source: Company compilation
Improvement in operating-stage profitability is a structural strength: Gross margin 16.9% (YoY +1.5pt) and Operating Margin 7.2% (YoY +0.9pt) show steady improvement at the operating level. Optimization of project mix and cost management were effective, maintaining margins at the upper end of the industry. Continued gross margin improvement would provide a sustainable base for operating profit growth going forward.
Normalization of working capital management and cash generation is the top priority: This period saw a large decrease in accounts payable that cut OCF YoY -56.0%, and cash conversion worsened to OCF/NI 0.64x and OCF/EBITDA 0.29x. FCF coverage of dividends is 0.15x, requiring cash on hand to fill the gap. Accelerating collections of receivables and smoothing accounts payable would substantially restore OCF, improving financial quality and dividend sustainability.
Smoothing of Special Losses and reduction of intangible asset risk: Special Losses of goodwill amortization ¥20.2B and impairments ¥9.6B reduced Net Income by -29.8%, but intangible asset balance has shrunk to ¥31.1B (YoY -53.6%), relatively lowering future impairment risk. The company projects Net Income +27.8% next fiscal year; if special losses normalize, final profit stability would improve and there would be room for ROE recovery.
This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement 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 professionals as needed before making investment decisions.