TOAMI (5973) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the cumulative Q3 of the fiscal year ending March 2026, operating income turned from a loss to a profit, with improved profitability being the key development. Revenue was ¥14.20B (+3.6% YoY), operating income was ¥0.22B (compared with a ¥0.08B loss in the same period of the previous year), ordinary income was ¥0.26B (compared with a ¥0.02B loss in the same period of the previous year), and net income was ¥0.18B (+267.0% YoY). The primary factor behind the return to profitability was the improvement in the gross profit margin from 14.2% to 16.5%, while non-operating income also supported ordinary income.

Factors Affecting Earnings

【Revenue】Revenue increased to ¥14.20B, up 3.6% YoY. By segment, Civil Engineering and Construction Works expanded significantly to ¥3.50B (+27.6% YoY), while the core Civil Engineering and Construction Materials segment declined to ¥10.88B (-2.4% YoY). The increase in revenue from the Works Business offset the decline in revenue from the Materials Business.

【Profit and Loss】The increase in cost of sales was below the rate of revenue growth, and the gross profit margin improved by approximately 2.3pt YoY to 16.5%. SG&A expenses were ¥2.12B, up 4.9% YoY and exceeding the revenue growth rate; however, the improvement in gross profit absorbed this increase, and operating income turned profitable at ¥0.22B (compared with a ¥0.08B loss in the same period of the previous year). Ordinary income was ¥0.26B, supported by ¥0.20B in non-operating income, including ¥0.10B in equity-method investment income and ¥0.02B in foreign exchange gains. Extraordinary gains and losses were largely offset, resulting in a limited impact on net income. In conclusion, the company achieved both revenue growth and profit growth.

Segment Analysis

Civil Engineering and Construction Materials recorded a revenue decline to ¥10.88B (-2.4% YoY), but operating income increased significantly to ¥0.43B (+82.8% YoY), with the operating margin improving to 4.0%. Civil Engineering and Construction Works recorded revenue growth to ¥3.50B (+27.6% YoY) and secured operating income of ¥0.16B, representing a 4.5% margin; however, a provision for construction loss of ¥0.05B was recognized, indicating that project profitability management remains necessary. Against combined segment profit of ¥0.59B, the adjustment for corporate expenses and other items was negative ¥0.37B. A notable feature is that the segments’ earnings power has not been sufficiently converted into consolidated operating income of ¥0.22B.

Key Financial Metrics

【Profitability】The operating margin was 1.6%, improving from negative 0.6% in the same period of the previous year, but it remains low in absolute terms, leaving only a small profit buffer against fluctuations in raw material and subcontracting costs. The gross profit margin increased to 16.5% from 14.2% in the same period of the previous year.【Cash Quality】Non-operating income of ¥0.20B was equivalent to approximately 90% of operating income of ¥0.22B, indicating a high degree of dependence on equity-method investment income of ¥0.10B. Non-operating expenses included ¥0.12B in provision for allowance for doubtful accounts, making trends in credit costs an area of focus.【Investment Efficiency】Annualized ROE was 2.1%, while the Equity Ratio was 55.2%, indicating a solid capital base.【Financial Soundness】Current assets of ¥10.19B exceeded current liabilities of ¥7.77B. However, short-term borrowings accounted for the majority of interest-bearing debt. Long-term borrowings declined from ¥0.67B in the previous year to ¥0.23B, while short-term borrowings increased from ¥3.33B to ¥4.16B, indicating an ongoing shortening of the borrowing maturity profile.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, an analysis of funding trends based on changes in the balance sheet indicates that cash and deposits were ¥1.82B, largely unchanged from ¥1.79B in the same period of the previous year. Total assets increased by ¥0.83B to ¥19.92B, accompanied by increases in property, plant and equipment and investment securities. On the liabilities side, long-term borrowings decreased by ¥0.44B, while short-term borrowings increased by ¥0.83B, indicating that asset expansion and refinancing were funded by shifting financing from long-term to short-term borrowings. Working capital (current assets of ¥10.19B − current liabilities of ¥7.77B) remained positive at ¥2.42B, providing a certain degree of flexibility for short-term funding needs.

Quality of Earnings

The increase in net income was driven not only by improved gross profit in the core business but also significantly by contributions from non-operating income that cannot necessarily be regarded as recurring. Equity-method investment income of ¥0.10B was equivalent to approximately 45% of operating income of ¥0.22B, indicating a high degree of dependence on the performance of affiliated companies. Foreign exchange gains of ¥0.02B and dividend income of ¥0.02B also supplemented ordinary income, although these items are susceptible to market conditions. Extraordinary income of ¥0.04B, including gains on the occurrence of negative goodwill, and extraordinary losses of ¥0.04B, including losses on the disposal of fixed assets, were largely offset, resulting in a limited impact on profit before tax. Comprehensive income was ¥0.31B, exceeding net income of ¥0.18B. The primary reason for this difference was a ¥0.13B increase in valuation differences on securities; therefore, a certain portion of the increase in profit for the period can be interpreted as containing non-recurring elements.

Earnings Forecast and Guidance

Against the full-year company forecasts of revenue of ¥20.00B, operating income of ¥0.21B, ordinary income of ¥0.30B, and net income of ¥0.17B, cumulative Q3 progress rates were 71.0% for revenue, 106.2% for operating income, 88.0% for ordinary income, and 105.9% for net income. Progress in operating income and net income has already substantially exceeded the standard progress benchmark of approximately 75% and surpassed the full-year forecasts. If the improvement in gross profit and contribution from equity-method investment income continue, the likelihood of achieving the plan is considered high. On the other hand, revenue progress is relatively low, and the pace of orders and revenue recognition toward Q4 will determine the full-year outcome.

Shareholder Returns

The Q2 dividend was ¥8.00 per share, representing the interim portion of the full-year company forecast of an annual dividend of ¥16.00 per share. Based on the full-year net income forecast of ¥0.17B and annual dividends of ¥16.00 per share, the forecast Payout Ratio is approximately 53.9%. Cumulative Q3 net income attributable to owners of the parent of ¥0.18B has already exceeded the full-year forecast. If the earnings level is maintained, dividend stability is expected to improve; however, the financial structure’s high dependence on short-term borrowings should be taken into consideration.

Risk Factors

1. Shortening of Financing Maturities: Short-term borrowings increased to ¥4.16B, up 24.9% YoY, while long-term borrowings declined to ¥0.23B, down 66.1%. Coverage of short-term liabilities by cash and deposits of ¥1.82B is limited, and changes in refinancing conditions could affect the company’s liquidity.

2. Low Absolute Profitability: The operating margin of 1.6% and annualized ROE of 2.1% are both low, leaving a small profit buffer against fluctuations in raw material prices, subcontracting costs, and construction project profitability. The Civil Engineering and Construction Works segment recognized a provision for construction loss of ¥0.05B.

3. Dependence on Equity-Method Investment Income and Non-Operating Income: Equity-method investment income of ¥0.10B was equivalent to approximately 45% of operating income of ¥0.22B, creating a structure in which fluctuations in the performance of affiliated companies affect ordinary income.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s operating margin and net profit margin are both substantially below the industry median, placing its profitability at the lower end of the industry.

Growth and Capital Efficiency

The revenue growth rate slightly exceeded the industry median, indicating that growth is generally at an average level within the industry.

※Source: Compiled by the Company

Key Earnings Highlights

1. The return from an operating loss to operating profitability and the improvement in the gross profit margin are the most important changes in cumulative Q3 results. However, the operating margin remains low at 1.6%.

2. Progress in operating income and net income has already exceeded 100% of the full-year forecasts. Gross profit levels in Q4, equity-method investment income, and trends in foreign exchange gains and losses will determine the full-year outcome.

3. The company has a high degree of dependence on short-term borrowings of ¥4.16B, with a shift away from long-term borrowings underway. This change in the financial structure should be monitored in terms of financing conditions.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,426–¥1,506 at ±1% for the cost of equity, and ¥1,452–¥1,474 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type with an explicit 5-year fade) / Interest Rate Reference Month: 2026-08 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, nor does it forecast or guarantee future share prices.)

---

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 a professional advisor as necessary.

---End of Report---