| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue | ¥603.0B | ¥662.8B | -9.0% |
| Operating Income | ¥76.8B | ¥106.1B | -27.7% |
| Ordinary Income | ¥83.1B | ¥112.3B | -26.1% |
| Net Income | ¥70.3B | ¥69.9B | +0.6% |
| ROE | 10.1% | 10.1% | - |
For the fiscal year ended March 2026, Revenue was ¥603.0B (YoY -¥59.8B, -9.0%), Operating Income was ¥76.8B (YoY -¥29.3B, -27.7%), Ordinary Income was ¥83.1B (YoY -¥29.2B, -26.1%), and Net Income was ¥70.3B (YoY +¥0.4B, +0.6%). While declines in Revenue led to double-digit drops in Operating and Ordinary Income, a gain on sale of investment securities of ¥18.2B was recorded as a special gain and, despite impairment losses of ¥28.8B, Net Income edged up. The core Construction Works Business slowed with Revenue of ¥542.0B (-8.1%) and Operating Income of ¥73.4B (-27.3%); the Boiler Business recorded Revenue of ¥64.8B (-15.3%) and Operating Income of ¥2.4B (-52.5%), showing a significant deterioration in profitability. The completed-contract gross margin was 21.9%, down 1.8pt from 23.7% the prior year, suggesting cost increases or a worse project mix. Operating margin was 12.7%, down 3.3pt from 16.0%, while Net margin improved to 11.7% from 10.5% (+1.2pt); margins compressed on an Ordinary Income basis. Operating Cash Flow was ¥65.0B, below Net Income, but proceeds from sale of investment securities supported Investment Cash Flow of +¥22.9B, resulting in FCF of ¥87.8B, sufficient to cover dividends of ¥28.9B and share buybacks of ¥27.4B.
Revenue of ¥603.0B was down ¥59.8B (‑9.0%) year-on-year. By segment, the Construction Works Business recorded ¥542.0B (‑8.1%, representing 89.9% of consolidated Revenue) and the Boiler Business ¥64.8B (‑15.3%, 10.7% share), both decelerating. By geography, domestic Revenue was ¥565.5B and Asia ¥37.4B, indicating a reduced overseas proportion versus the prior year and suggesting softer external demand or selective order intake. The Construction segment's Revenue decline is likely tied to a decrease in contract assets (¥61.4B at prior year-end → ¥49.3B at current year-end, -19.7%) and changes in the order environment; however, contract liabilities increased to ¥15.4B from ¥4.9B at prior year-end (+¥10.5B), confirming buildup of advance receipts. The completed-contract gross margin fell to 21.9% from 23.7% (-1.8pt), and gross profit declined to ¥132.1B (prior year ¥157.4B, -16.0%), indicating profit compression greater than the Revenue decline.
From gross profit of ¥132.1B (gross margin 21.9%), SG&A amounted to ¥55.3B (SG&A ratio 9.2%, up ¥4.0B from prior year ¥51.3B), yielding Operating Income of ¥76.8B (Operating margin 12.7%). This was a large decline of ¥29.3B (-27.7%) from prior year Operating Income of ¥106.1B. By segment, the Construction Works Business delivered Operating Income of ¥73.4B (margin 13.5%, down -27.3% from prior year ¥101.0B), and the Boiler Business Operating Income was ¥2.4B (margin 3.7%, down -52.5% from prior year ¥5.0B), with the Boiler segment’s profitability deterioration notable. Non-operating income totaled ¥8.6B (dividends received ¥2.2B, interest income ¥1.4B, investment partnership gains ¥0.7B, etc.), non-operating expenses were ¥2.3B, resulting in net non-operating income of +¥6.3B. Ordinary Income was ¥83.1B (prior year ¥112.3B, -26.1%). Special gains were ¥19.3B (gain on sale of investment securities ¥18.2B, gain on sale of fixed assets ¥0.7B), and special losses were ¥28.8B (mainly impairment losses of ¥28.8B), producing net special items of -¥9.5B. Pre-tax income of ¥73.6B less income taxes of ¥18.9B (effective tax rate 25.7%) resulted in Net Income of ¥70.3B (prior year ¥69.9B, +0.6%). Non-controlling interests attributable loss was -¥0.3B (prior year +¥2.1B), and Net Income attributable to owners of the parent was ¥54.9B, below consolidated Net Income. In summary, despite lower Revenue and profits, special gains and tax effects led to a slight rise in final Net Income.
The Construction Works Business reported Revenue of ¥542.0B (‑8.1%) and Operating Income of ¥73.4B (‑27.3%), with a margin of 13.5% (down 3.6pt from 17.1%). Declining gross margins and higher SG&A materially weakened profitability. The Boiler Business had Revenue of ¥64.8B (‑15.3%) and Operating Income of ¥2.4B (‑52.5%), margin 3.7% (down 3.1pt from 6.8%). Both segments slowed, with the Boiler Business’ drop in profitability notably dilutive to consolidated margins. The Construction Works Business accounts for 95.6% of consolidated Operating Income, making its recovery key to group performance.
Profitability: Operating margin 12.7% (down 3.3pt from 16.0%), Net margin 11.7% (up 1.2pt from 10.5%). Completed-contract gross margin 21.9% (down 1.8pt from 23.7%), suggesting cost inflation or adverse project mix. ROE 10.1% (company calculation based on Net Income attributable to owners of the parent ~7.9%) declined from 12.8% last year, primarily due to margin deterioration.
Cash quality: Operating Cash Flow was ¥65.0B versus Net Income ¥70.3B, giving an Operating CF/Net Income ratio of 0.92x. Accrual ratio was -0.08 (within healthy range). From subtotal Operating CF ¥91.3B (after pre-tax adjustments), taxes paid were ¥32.7B; working capital changes included decrease in trade receivables +¥26.7B, decrease in trade payables -¥27.8B, and increase in contract liabilities +¥10.5B. OCF/EBITDA was 0.76x, somewhat low, reflecting mixed effects of increased advance receipts and reduced payables.
Investment efficiency: Total asset turnover was 0.70x (Revenue ¥603.0B / Total assets ¥856.0B), inventory turnover days 1.9 days indicating very low inventories. Capital expenditures were ¥4.6B vs. depreciation ¥9.6B, CapEx/Depreciation 0.48x, indicating continued investment restraint.
Financial soundness: Equity Ratio 81.2% (up 3.8pt from 77.4%), current ratio 475.4%, quick ratio 473.0%—extremely strong. Interest-bearing debt was ¥1.0B (short-term borrowings in current liabilities ¥0B + long-term borrowings ¥1.0B), Debt/EBITDA 0.01x, interest coverage 1096x, effectively net cash. Cash and deposits ¥365.1B and investment securities ¥64.0B provide liquidity exceeding 50% of total assets.
Operating Cash Flow was ¥65.0B, slightly below Net Income of ¥70.3B. From the Operating CF subtotal (post pre-tax adjustments) of ¥91.3B, taxes paid were ¥32.7B. Working capital movements were chiefly decrease in trade receivables +¥26.7B, decrease in trade payables -¥27.8B, and increase in contract liabilities +¥10.5B. The rise in contract liabilities (advance receipts) provided cash inflow, while reduction in payables was a cash outflow; overall working capital was roughly neutral. Investment Cash Flow was a net inflow of ¥22.9B, largely due to proceeds from sale/redemption of investment securities ¥22.2B, comfortably exceeding CapEx of -¥4.6B. FCF (Operating CF + Investment CF) was a healthy ¥87.8B. Financing Cash Flow was -¥56.4B as dividends ¥28.9B (payout ratio 34.3%) and share buybacks ¥27.4B were executed for shareholder returns. FCF covered total shareholder returns of ¥56.3B, and cash and deposits rose slightly from ¥362.6B at the beginning of the period to ¥365.1B at year-end. Interest and dividends received were ¥3.5B, interest paid ¥0.1B, indicating stable financial income. The gap between depreciation ¥9.6B and CapEx ¥4.6B suggests continued capex restraint.
Recurring earnings centered on completed-contract gross profit ¥132.1B and non-operating income ¥8.6B (dividends received ¥2.2B, interest received ¥1.4B, investment partnership gains ¥0.7B, etc.). Non-operating income was 1.4% of Revenue, well below a 5% threshold, indicating limited volatility. One-off items included special gains of ¥19.3B (gain on sale of investment securities ¥18.2B, gain on sale of fixed assets ¥0.7B) and special losses of ¥28.8B (impairment losses ¥28.8B; ¥27.2B for Construction, ¥1.6B for Boiler), producing net special items of -¥9.5B that weighed on Net Income. With Ordinary Income at ¥83.1B and Net Income at ¥70.3B, special items and tax effects compressed final profits. Accrual quality (Operating CF / Net Income) was 0.92x, and Operating CF/EBITDA 0.76x, generally acceptable but includes a temporary boost from contract liabilities +¥10.5B (advance receipts). Decrease in trade receivables +¥26.7B suggests improved collection efficiency, while decrease in trade payables -¥27.8B indicates earlier payment timing; working capital movements appear to reflect intra-period cash management.
Full Year forecast: Revenue ¥610.0B (actual ¥603.0B, achievement 98.9%), Operating Income ¥70.0B (actual ¥76.8B, 109.6%), Ordinary Income ¥76.5B (actual ¥83.1B, 108.5%), Net Income ¥48.0B (actual ¥70.3B, 146.5%). Operating-to-Ordinary stages exceeded plan, due to better-than-expected project profitability and SG&A control, while Net Income significantly beat plan because of the offset between special gains (gain on sale of investment securities ¥18.2B) and impairment losses ¥28.8B. Year-on-year assumptions for the full-year forecast were Revenue +1.2%, Operating Income -8.8%, Ordinary Income -7.9%, Net Income -31.8%; the gap versus actuals was mainly driven by volatility in special items. Forecast EPS was ¥122.00 vs. actual ¥116.92, and forecast dividend ¥25.00 vs. actual ¥65.00 (interim ¥20 + year-end ¥45), reflecting a substantial dividend increase.
Annual dividend was ¥65 (interim ¥20, year-end ¥45), up ¥44 from prior year ¥21—a large increase. Payout ratio was 34.3% (based on Net Income attributable to owners of the parent), within a sustainable range. Share buybacks amounted to ¥27.4B, making total returns dividends ¥28.9B + buybacks ¥27.4B = ¥56.3B. Against FCF of ¥87.8B, total returns represent 64.1% coverage—adequate. Total return ratio ((dividends ¥28.9B + buybacks ¥27.4B) / Net Income attributable to owners of the parent ¥54.9B) equals 102.6%, exceeding profit but covered on an FCF basis. Treasury stock increased to ¥77.4B (book value), representing 16.7% of issued shares. Given cash and deposits ¥365.1B and Debt/EBITDA 0.01x, the financial base is strong and dividend continuity is feasible; however, with CapEx/Depreciation 0.48x and continued investment restraint, prolonged bias toward returns could dilute future earning capacity.
Gross margin deterioration risk: Completed-contract gross margin at 21.9% (‑1.8pt YoY) shows clear deterioration. Persistent material and labor cost inflation or a worsening project mix could compress Construction Works Business profitability. Provision for contract losses is ¥0.0B and no major unprofitable projects are apparent, but rising costs or weakened pricing power could further squeeze margins.
Segment concentration risk: The Construction Works Business accounts for 89.9% of consolidated Revenue and 95.6% of Operating Income, indicating high dependence. The Boiler Business’ Operating margin is 3.7% (prior 6.8%) with sharply reduced profitability; a slowdown in the core segment or low profitability in other segments could cause large swings in consolidated results.
Competitive position deterioration from underinvestment: CapEx ¥4.6B vs Depreciation ¥9.6B (CapEx/Depreciation 0.48x) indicates sustained capex restraint. Delays in digital investment or equipment renewal could lower productivity and project responsiveness mid-term. Sustaining high shareholder returns (dividends + buybacks ¥56.3B) alongside necessary investment may become difficult long-term.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.7% | 5.5% (3.5%–7.2%) | +7.2pt |
| Net Margin | 11.7% | 3.5% (2.5%–4.4%) | +8.2pt |
The company maintains a significantly higher profitability profile than the industry median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -9.0% | 9.8% (-2.1%–15.1%) | -18.9pt |
The company lags the industry median substantially on growth and reversing the downtrend in Revenue is a key challenge.
※ Source: Company compilation
In the near term, solid cash generation and a strong balance sheet provide support, but clear downward trends in profitability are observed: Operating margin 12.7% (‑3.3pt YoY) and completed-contract gross margin 21.9% (‑1.8pt YoY). The Boiler Business Operating margin fell to 3.7% (prior 6.8%), and the core Construction Works Business margin deteriorated to 13.5% (prior 17.1%). If the main drivers of gross margin decline (material/labor inflation, project mix deterioration) are not addressed, medium-term earning power is at risk.
CapEx of ¥4.6B vs Depreciation ¥9.6B (CapEx/Depreciation 0.48x) shows continued investment restraint. Concurrently, dividends ¥28.9B and buybacks ¥27.4B resulted in total returns of ¥56.3B, consuming 64% of FCF ¥87.8B. While shareholder returns are commendable in the short term, prolonged underinvestment may lead to asset aging and delayed digital adoption, undermining future competitiveness and productivity. Restoring balance between investment levels and returns is a medium-term focal point.
Contract liabilities rose to ¥15.4B from ¥4.9B at prior year-end (+¥10.5B), confirming buildup of advance receipts which suggests short-term project depth. However, with Revenue growth -9.0% and a decline in contract assets to ¥49.3B (‑19.7% YoY), monitoring backlog and contract asset trends is necessary. Industry benchmarking shows the company’s Operating margin 12.7% well above the median 5.5%, but Revenue growth -9.0% lags the industry median +9.8% by 18.9pt, underscoring the need to improve the balance between profitability and growth.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the company using publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.