| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1438.8B | ¥1593.7B | -9.7% |
| Operating Income / Operating Profit | ¥135.0B | ¥166.8B | -19.0% |
| Ordinary Income | ¥136.1B | ¥162.9B | -16.5% |
| Net Income / Net Profit | ¥42.9B | ¥61.7B | -30.4% |
| ROE | 3.1% | 4.8% | - |
The 2026 FY results landed with revenue of ¥1438.8B (YoY -¥154.9B -9.7%), Operating Income of ¥135.0B (YoY -¥31.8B -19.0%), Ordinary Income of ¥136.1B (YoY -¥26.8B -16.5%), and Net Income attributable to owners of the parent of ¥42.9B (YoY -¥18.8B -30.4%), representing declines in both revenue and profit. Against the revenue contraction, SG&A ratio rose from 7.3% to 8.8% (+1.5pt), causing Operating Margin to fall from 10.5% to 9.4% (-1.1pt). The gap between Ordinary Income and Net Income was driven by Special Losses of ¥6.7B (asset retirement losses, etc.) and the reversal of prior-year Special Gains of ¥17.8B (gain on sale of investment securities); the effective tax rate was 32.9%, a standard level. Operating Cash Flow was ¥429.9B (YoY +¥432.0B +2080.3%), an extremely strong cash generation equivalent to 10.0x Net Income, funding M&A investment of ¥167.5B and dividends of ¥46.2B while securing Free Cash Flow of ¥209.3B.
【Revenue】Revenue was ¥1438.8B (-9.7%) but Gross Margin improved by 0.3pt to 18.1% (prior year 17.8%), yielding Gross Profit of ¥261.1B (prior year ¥283.5B). Segment-level data is not disclosed, but with six subsidiaries newly consolidated through M&A and business acquisition cash outflow of ¥167.5B (11.6% of revenue), this period’s revenue decline is inferred to reflect timing of construction progress in existing businesses and project mix. Non-operating income totaled ¥7.3B (interest income ¥0.4B, equity-method investment income ¥0.3B, dividend income ¥3.3B), small but increased from ¥4.8B in the prior year. Foreign exchange gains of ¥0.9B were recorded, while foreign exchange losses of ¥3.0B also occurred, leaving a net negative FX impact.
【Profit & Loss】SG&A was ¥126.1B (prior year ¥116.7B, +8.0%), raising the SG&A ratio to 8.8% (prior year 7.3%, +1.5pt), and the downward rigidity of fixed costs amid revenue decline pressured Operating Margin. Operating Income was ¥135.0B (-19.0%), Operating Margin 9.4% (-1.1pt). Non-operating expenses were ¥6.2B, primarily interest expense of ¥4.0B. Ordinary Income was ¥136.1B (-16.5%), showing only limited improvement from Operating Income. Pre-tax income declined sharply to ¥129.4B (prior year ¥179.9B, -28.1%) due to recording Special Losses of ¥6.7B and the reversal of prior-year Special Gains of ¥17.8B. After income taxes of ¥42.6B (effective tax rate 32.9%) and non-controlling interests of ¥0.3B, Net Income attributable to owners of the parent was ¥42.9B (-30.4%). In conclusion, the company delivered lower revenue and profit, with volatility in special items amplifying the decline in Net Income.
【Profitability】Operating Margin was 9.4% (prior year 10.5%, -1.1pt) but remained 1.6pt above the manufacturing median of 7.8%. Gross Margin improved to 18.1% (prior year 17.8%, +0.3pt), while SG&A ratio rose to 8.8% (prior year 7.3%, +1.5pt), showing deterioration in operating leverage which pressured margins. Net Margin fell to 3.0% (prior year 3.9%, -0.9pt) and ROE was 3.1%, about half of the prior year 6.6%. Decomposing ROE: Net Margin 3.0% × Total Asset Turnover 0.565 × Financial Leverage 1.84x, with the decline in Net Margin being the largest contributor.
【Cash Quality】Operating Cash Flow of ¥429.9B was 10.0x Net Income of ¥42.9B, aided by working capital improvements (advances received +¥26.8B, allowance for construction loss +¥10.3B). OCF/EBITDA ratio was 2.38x, a high level, and the accrual ratio was -13.5%, indicating a cash-driven earnings profile. Free Cash Flow was ¥209.3B, comfortably exceeding the combined total of dividends and capital expenditures of ¥82.8B, preserving flexibility in capital allocation.
【Investment Efficiency】Total Assets increased to ¥2,545.7B (prior year ¥2,161.8B, +17.8%), driven by intangible fixed assets +¥61.8B (+140.2%) related to M&A, investment securities +¥53.0B (+51.6%), and cash and deposits +¥276.6B (+164.3%). Total Asset Turnover declined to 0.565x (prior year 0.737x), indicating weaker asset efficiency. Accounts receivable on completed contracts remained high at ¥1,198.9B (prior year ¥1,271.4B) but decreased YoY, showing some progress in collections.
【Financial Soundness】Equity Ratio was 54.2% (prior year 59.7%, -5.5pt), but liquidity remains strong with Current Ratio 199.5% and Quick Ratio 193.5%. Interest-bearing debt rose to ¥480.8B (prior year ¥335.0B, +43.5%), notably with short-term borrowings surging to ¥271.0B (prior year ¥60.0B), raising the short-term debt ratio to 67.7% and increasing maturity concentration risk. Debt/EBITDA was 2.21x and Interest Coverage was 45.3x, healthy levels, but transparency of the refinancing plan will be an important issue going forward.
Operating Cash Flow was ¥429.9B, 10.0x Net Income of ¥42.9B, a large improvement from prior year -¥21.7B. The subtotal (pre-working capital changes) was ¥487.0B, with working capital improvements such as advances received +¥26.8B and allowance for construction loss +¥10.3B contributing, while accounts receivable on completed contracts increased by -¥72.5B. After income tax payments of ¥53.0B, OCF/EBITDA was 2.38x, indicating strong cash generation. Investing Cash Flow was -¥220.6B, led by business acquisitions -¥167.5B, PPE investment -¥37.0B, and intangible asset investment -¥14.8B. M&A investment reached 11.6% of revenue, indicating a phase of scale expansion. Free Cash Flow was robust at ¥209.3B, and Financing Cash Flow was positive ¥66.6B, comprising net increase in short-term borrowings ¥131.0B, net increase in long-term borrowings ¥30.0B, bond redemption -¥31.0B, dividends -¥46.2B, and share buybacks -¥20.0B, balancing growth investment and shareholder returns while strengthening liquidity. Cash and deposits increased to ¥444.9B (prior year ¥168.3B), up 164.3%, leaving an extremely strong year-end liquidity buffer.
Of Ordinary Income ¥136.1B, Operating Income accounted for ¥135.0B, with reliance on non-operating income only 5.1% (non-operating income ¥7.3B: dividend income ¥3.3B, FX gains ¥0.9B, etc.), indicating high quality of recurring earnings. Special Losses of ¥6.7B (asset retirement losses ¥2.2B, etc.) amounted to about 15.6% of Net Income and were temporary in nature; the reversal of prior-year Special Gains of ¥17.8B (gain on sale of investment securities ¥17.7B) amplified the YoY decline in Net Income. Operating Cash Flow of ¥429.9B being 10.0x Net Income, and OCF/EBITDA 2.38x, provide strong cash backing; accrual ratio -13.5% indicates a cash-led earnings structure. The gap between Ordinary Income and Net Income is mainly explained by special items and tax burden (effective tax rate 32.9%), with limited structural divergence. Comprehensive income was ¥119.5B, ¥76.6B above Net Income ¥42.9B, primarily driven by valuation gains on other securities of ¥32.7B, meaning valuation gains on held shares boosted comprehensive income.
The full year 2027 guidance assumes Revenue ¥1,980.0B (+37.6%), Operating Income ¥120.0B (-11.1%), Ordinary Income ¥112.0B (-17.7%), and EPS ¥208.24, indicating revenue growth with profit decline. The substantial revenue increase is expected to be driven by consolidation from M&A and progress of large construction projects, while Operating Margin is conservatively assumed to decline to 6.1% (from this period’s 9.4%, -3.3pt). This likely incorporates front-loaded costs in early project stages, changes in project mix, and upfront M&A integration expenses. Progress ratios show revenue at 72.7% year-to-date (¥1,438.8B/¥1,980.0B) and Operating Income at 112.5% year-to-date (¥135.0B/¥120.0B), indicating profits have already exceeded the full-year forecast and suggesting a cautious stance on second-half profitability. Dividend guidance is ¥65, a reduction from this period’s ¥120, with payout ratio vs EPS forecast of about 31%, a conservative setting.
Annual dividend was ¥120 (interim ¥60, year-end ¥60), total dividends approximately ¥46.2B, payout ratio 34.7% (quarterly-based calculation would be ~275.4% but full-year basis is appropriate). Dividend coverage vs Free Cash Flow of ¥209.3B is 4.5x, indicating ample cushion and high sustainability. Share buybacks of ¥20.0B were executed, making total return ¥66.2B and Total Return Ratio 154.2%. Given cash and deposits ¥444.9B and Operating Cash Flow ¥429.9B, shareholder returns via both dividends and buybacks are sustainable. The 2027 dividend forecast of ¥65 (payout ratio ~31% vs EPS forecast ¥208.24) is conservative, leaving upside potential depending on performance.
Profitability deterioration risk: Large bridge and steel structure projects can suffer from front-loaded costs in early stages and allowance charges that depress profits. This period saw allowance for construction loss of ¥51.2B, equivalent to 3.6% of revenue, making project mix and progress management key profit volatility drivers. The 2027 guidance Operating Margin of 6.1% (this period 9.4%) is conservative, but further deterioration would pose downward risk.
Short-term debt concentration risk: Short-term borrowings ¥271.0B and long-term borrowings maturing within one year ¥180.6B push the short-term debt ratio to 67.7%, increasing maturity concentration. Though Interest Coverage 45.3x and cash ¥444.9B indicate strong liquidity, transparency around refinancing plans and interest terms is important. In a rising interest rate environment, interest expense (¥4.0B this period) could increase.
M&A integration risk: Business acquisition cash outflow ¥167.5B and six newly consolidated subsidiaries demonstrate active M&A, increasing goodwill to ¥58.7B and intangible fixed assets to ¥105.8B. Goodwill/EBITDA 0.32x is at a healthy level, but integration delays or slower synergy realization could further raise SG&A ratio or lead to impairment risk. The SG&A ratio increase from 7.3% to 8.8% may partly reflect higher integration costs.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.4% | 7.8% (4.6%–12.3%) | +1.6pt |
| Net Margin | 3.0% | 5.2% (2.3%–8.2%) | -2.2pt |
Operating Margin is above the manufacturing median, but Net Margin is below median due to special items and rising SG&A ratio.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -9.7% | 3.7% (-0.4%–9.3%) | -13.4pt |
Revenue growth lags the industry median significantly, reflecting the impact of existing business project timing and construction progress.
※ Source: Company aggregation
Strength of cash generation and room for capital allocation: Operating Cash Flow ¥429.9B is 10.0x Net Income and OCF/EBITDA 2.38x, driven by working capital improvements such as advances received and allowances. Free Cash Flow ¥209.3B funded dividends, capex, and M&A while building cash to ¥444.9B, providing substantial room for additional growth investment or shareholder returns. Although short-term debt ratio is 67.7% and maturity concentration risk exists, the ample liquidity buffer limits immediate financing concerns.
Monitor margins during M&A integration: Business acquisition cash outflow ¥167.5B and six newly consolidated subsidiaries are expanding scale, with 2027 revenue plan ¥1,980B (+37.6%). Operating Margin is conservatively assumed to fall to 6.1% (this period 9.4%), reflecting integration costs, front-loaded project costs, and project mix changes. This period’s Operating Income ¥135.0B already exceeds the full-year forecast ¥120.0B, making second-half margin management and integration progress pivotal. Goodwill/EBITDA 0.32x and goodwill/Net Assets 4.2% are at healthy levels, but delayed synergy realization could further increase SG&A ratio or create impairment risk.
Sustainability of shareholder returns and dividend policy: Dividend ¥120 (payout ratio 34.7%) and share buybacks ¥20B totaling ¥66.2B were executed within Free Cash Flow ¥209.3B, indicating high sustainability. The 2027 dividend forecast ¥65 (payout ratio ~31% vs EPS forecast ¥208.24) is conservative, and there is upside if performance improves. Given cash ¥444.9B and strong Operating Cash Flow, mid-to-long-term dividend increases remain feasible despite the current dividend cut.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our company based on public financial statements. Investment decisions are your responsibility; please consult professionals as needed.