KRAFTIA CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

The company posted a decline in both revenue and operating income, while securing increases in ordinary income and net income through the expansion of non-operating income, resulting in earnings characterized by lower revenue but higher profits. Revenue was limited to ¥98.70B (-1.9% YoY), and operating income was ¥10.73B (-3.3% YoY); however, non-operating income expanded to ¥1.72B (¥0.82B in the previous year), driven by increases in dividends received and equity-method investment income. Consequently, ordinary income was ¥12.21B (+4.0% YoY), while net income attributable to owners of the parent (consolidated) was ¥8.45B (¥7.75B in the previous year, +9.0% YoY). Although the gross profit margin on completed construction contracts in the core Facilities Construction Business improved to 19.1% (18.6% in the previous year), the increase in the SG&A ratio slightly lowered the operating margin to 10.9% (11.0% in the previous year).

Factors Affecting Earnings

【Revenue】Revenue was ¥98.70B, representing a 1.9% YoY decline. The core Facilities Construction Business, which accounted for 95.7% of the revenue mix, was somewhat weak at ¥94.43B, down 2.3% YoY, weighing on the overall result. Meanwhile, Other Businesses, including materials and equipment sales, real estate, and renewable energy, secured double-digit revenue growth of ¥5.56B, up 12.2% YoY, partially offsetting the decline. Revenue from completed construction contracts was ¥94.36B, reflecting the seasonal pattern of construction progress.

【Profit and Loss】The gross profit margin on completed construction contracts improved to 19.1% (18.6% in the previous year), and project profitability remained solid. Meanwhile, SG&A expenses increased to ¥8.52B (SG&A ratio: 8.6%; 8.1% in the previous year), resulting in operating income of ¥10.73B (-3.3% YoY) and a slight decline in the operating margin to 10.9% (11.0% in the previous year). Non-operating income expanded to ¥1.72B (¥0.82B in the previous year), with dividends received of ¥1.00B and equity-method income of ¥0.17B contributing to the increase in ordinary income to ¥12.21B (+4.0% YoY). Extraordinary income of ¥0.31B (including a ¥0.18B gain on sales of investment securities) and extraordinary losses of ¥0.12B were both small, and their impact on profit before income taxes of ¥12.40B was limited. Net income (consolidated) after deducting income taxes and other taxes of ¥3.95B (effective tax rate: 31.9%) was ¥8.45B (+9.0% YoY). The structure was one in which the expansion of non-operating income offset the decline in operating income; in conclusion, revenue declined while profit increased.

Segment Analysis

The Facilities Construction Business generated revenue of ¥94.43B (-2.3% YoY), operating income of ¥9.95B (-2.8% YoY), and a profit margin of 10.5%, making it the core business that accounts for the majority of consolidated revenue and determines overall performance. Other Businesses (including materials and equipment sales, real estate, renewable energy, and staffing services) expanded while securing higher profitability than the Facilities Construction Business, with revenue of ¥5.56B (+12.2% YoY), operating income of ¥0.74B (+9.5% YoY), and a profit margin of 13.3%. Although the decline in revenue and profit in the Facilities Construction Business weighed on consolidated results, the increase in revenue and profit in Other Businesses provided clear support.

Key Financial Indicators

【Profitability】The operating margin edged down to 10.9% (11.0% in the previous year). Although the gross margin improved to 19.5% (19.1% in the previous year), this was offset by the increase in the SG&A ratio to 8.6% (8.1% in the previous year). The net profit margin based on net income attributable to owners of the parent improved to 8.5% (7.7% in the previous year), indicating that the expansion of non-operating income lifted the bottom-line margin.【Cash Quality】Cash and deposits increased to ¥54.14B (¥51.94B in the previous year). The current ratio, calculated from current assets of ¥262.02B and current liabilities of ¥116.57B, remained at a high level of 224.8%, indicating strong liquidity.【Investment Efficiency】ROE was 2.4%, consisting of a net profit margin of 8.5% × total asset turnover of 0.20x × financial leverage of 1.40x. The low total asset turnover remains a constraint on capital efficiency.【Financial Soundness】The equity ratio improved to 71.3% (66.4% in the previous year), while interest-bearing debt (short-term ¥16.3B and long-term ¥8.7B, totaling ¥25.0B) remained at only 5.1% of total assets, indicating a conservative financial structure.

Cash Flow Analysis

Cash and deposits were ¥54.14B, an increase of ¥2.20B from ¥51.94B at the end of the same period of the previous year. Accounts receivable from completed construction contracts decreased by 22.9% YoY to ¥137.28B, suggesting that progress in collecting receivables had a positive impact on cash generation. Meanwhile, costs on uncompleted construction contracts increased to ¥12.10B (¥8.15B in the previous year, +48.4%), indicating greater upfront funding in line with construction progress. Advances received on uncompleted construction contracts, corresponding to construction prepayments, increased to ¥29.25B (¥26.55B in the previous year, +10.2%) and functioned as a source of funds. Property, plant and equipment increased to ¥89.34B (¥85.36B in the previous year), suggesting that capital investment has continued at a certain level. Overall, progress in collecting receivables and the accumulation of advances received have supported the company’s cash management.

Quality of Earnings

Recurring earnings are centered on operating income from the Facilities Construction Business, but the increase in profit during the current quarter depended significantly on the expansion of non-operating income. Non-operating income was ¥1.72B (¥0.82B in the previous year), consisting primarily of dividends received of ¥1.00B, equity-method investment income of ¥0.17B, and gains on management of investment partnerships of ¥0.18B. Extraordinary income was ¥0.31B (including a ¥0.18B gain on sales of investment securities and a ¥0.12B gain on sales of fixed assets), while extraordinary losses were ¥0.12B, resulting in a net gain of only ¥0.18B and a limited impact on profit before income taxes of ¥12.40B. Against ordinary income of ¥12.21B, net income attributable to owners of the parent was ¥8.42B, with the deduction of income taxes and other taxes of ¥3.95B (effective tax rate: 31.9%) being the primary difference. Comprehensive income was ¥9.23B (¥9.16B attributable to owners of the parent), and the difference from net income of ¥8.42B resulted from a ¥0.77B increase in valuation difference on other securities. Changes in the market value of held shares generated the divergence between the two figures. As the decline in operating income was offset by non-operating income, sustainable improvement in core earnings power—the profitability of the operating stage—will be a key focus going forward.

Earnings Forecast and Guidance

The Q1 progress rates against the full-year plan (revenue of ¥500.00B, operating income of ¥55.50B, ordinary income of ¥59.00B, EPS of ¥572.54, and dividends of ¥110) were 19.7% for revenue, 19.3% for operating income, 20.7% for ordinary income, and 20.8% for net income attributable to owners of the parent (¥8.42B/¥40.50B). Although these rates were below the simple seasonal allocation of 25%, the construction industry tends to record a greater proportion of revenue from completed construction contracts in the second half as construction progresses; therefore, caution is required when making simple comparisons of progress rates. As of the current quarter, the company had made no revisions to either its earnings forecast or dividend forecast.

Shareholder Returns

The annual dividend forecast is ¥110, representing a planned increase of ¥20 from the previous fiscal year’s actual dividend of ¥90. The payout ratio against forecast EPS of ¥572.54 is approximately 19.2%, and there has been no revision to the dividend forecast as of the current quarter. Given the financial foundation of an equity ratio of 71.3% and cash and deposits of ¥54.14B, the stability of the dividend funding base is considered high.

Risk Factors

1. Business Concentration Risk: The Facilities Construction Business accounts for 95.7% of revenue (¥94.43B/¥98.70B), indicating a high degree of dependence on a single business. Revenue in this business declined 2.3% YoY, while operating income declined 2.8% YoY, creating a structure in which fluctuations in business profitability are likely to flow directly through to consolidated results.

2. Margin Pressure from Cost Increases: The SG&A ratio rose by 0.55pt to 8.6% (8.1% in the previous year), offsetting the improvement in the gross margin (+0.4pt) and lowering the operating margin to 10.9% (11.0% in the previous year). If the upward trend in personnel and indirect costs continues, profitability at the operating level may be further compressed.

3. Working Capital Volatility Risk: Costs on uncompleted construction contracts increased to ¥12.10B (¥8.15B in the previous year, +48.4%), while the provision for losses on construction contracts remained broadly flat at ¥4.72B (¥4.78B in the previous year, -1.4%). If upfront funding associated with construction progress expands or the profitability of large projects deteriorates, this could lead to an increase in provisions.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company’s operating margin and net profit margin both substantially exceed the industry median, placing its profitability among the higher levels within the industry.

Growth and Capital Efficiency

The company’s revenue growth rate is below the industry median, and its growth profile compares unfavorably with that of peers experiencing revenue growth.

*Source: Compiled by the Company

Key Points from the Earnings Results

1. Despite lower revenue and operating income, ordinary income and net income increased due to the expansion of non-operating income. This is an important point when assessing the quality of earnings in the current quarter. The sustainability of non-operating income, such as dividends received and equity-method income, will be an area for monitoring going forward.

2. While the gross margin improved to 19.5% (19.1% in the previous year), the SG&A ratio increased to 8.6% (8.1% in the previous year), causing the operating margin to edge down to 10.9% (11.0% in the previous year). The ability to respond to cost increases is a structural point of focus that will determine profitability at the operating level.

3. The Q1 progress rates against the full-year plan were 19.7% for revenue and 19.3% for operating income, below the simple seasonal allocation of 25%. However, progress should be assessed in light of the construction industry’s characteristic seasonality, with greater activity concentrated 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 model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥5,368–¥5,694 at ±1% for the cost of equity, and ¥5,514–¥5,549 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from 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: 2026-06 / 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 release 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, after consulting with a professional as necessary.

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