FUJI CORPORATION LIMITED FY2027 Q1 Earnings Report

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Executive Summary

In Q1, the Company recorded lower revenue and lower profit, primarily due to a decrease in deliveries of subdivided housing and increased interest expenses. Revenue was ¥35.28B (-4.9% YoY), Operating Income was ¥2.04B (-19.2%), Ordinary Income was ¥1.71B (-27.9%), and Net Income was ¥1.12B (-30.4%). While revenue and profit from subdivided housing declined significantly, the Rental and Management and Housing Distribution (Existing Homes) businesses supported results with higher revenue and profit. The increase in interest expenses (+40.1% YoY) contributed to the wider decline at the Ordinary Income level.

Factors Affecting Performance

【Revenue】Company-wide Revenue was ¥35.28B, down -4.9% YoY. Housing Distribution (Existing Homes) increased to ¥10.36B (+52.6%), Rental and Management rose to ¥8.89B (+7.7%), and Land Utilization increased to ¥8.24B (+5.4%). In contrast, Subdivided Housing declined to ¥7.83B (-44.1%), while Construction-Related declined to ¥0.53B (-9.9%). The primary cause of the Company-wide revenue decline was the timing shift in deliveries in the Subdivided Housing business, while growth in stock-based segments—Existing Homes and Rental and Management—partially offset the decline.

【Profit and Loss】The Operating Income margin was 5.8%, down approximately 1.0pt from 6.8% in the previous year. Although the Gross Profit margin was largely flat at 15.0%, SG&A expenses increased to ¥3.26B (+5.3%) despite lower revenue, resulting in deterioration in operating leverage. Ordinary Income was ¥1.71B (-27.9%), while the increase in interest expenses to ¥0.525B (¥0.375B in the previous year, +40.1%) further widened the decline from Operating Income. Extraordinary items were minor, consisting of Extraordinary Income of ¥0.006B and Extraordinary Losses of ¥0.008B. After deducting income taxes and other taxes of ¥0.60B (effective tax rate: 34.9%) from Profit Before Tax of ¥1.71B, Net Income was ¥1.12B. In conclusion, the Company recorded lower revenue and lower profit.

Segment Analysis

Rental and Management was the largest earnings contributor among all segments, generating Operating Income of ¥1.07B (margin: 12.0%). It supported Company-wide profit through higher revenue and profit, with revenue up +7.7% and profit up +5.7%. Housing Distribution (Existing Homes) recorded significant increases in both revenue and profit, with revenue of ¥10.36B (+52.6%) and Operating Income of ¥0.51B (+126.3%; margin: 4.9%), indicating continued structural migration toward stock-based revenues. Land Utilization increased revenue to ¥8.24B (+5.4%), but Operating Income declined slightly to ¥0.69B (-2.7%), resulting in a margin of 8.3%. Subdivided Housing recorded substantial declines in both revenue and profit, with revenue of ¥7.83B (-44.1%) and Operating Income of ¥0.21B (-78.0%; margin: 2.7%), reflecting its high volatility due to the timing of project deliveries. Construction-Related continued to operate at a loss, with revenue of ¥0.53B (-9.9%) and an Operating Loss of ¥0.02B, resulting in a margin of -2.9%. Significant differences in profitability among the segments persist, with Rental and Management and Land Utilization characterized by high margins, while Subdivided Housing and Construction-Related remain low-margin businesses.

Key Financial Indicators

【Profitability】The Operating Income margin declined to 5.8% (6.8% in the previous year), while the Net Income margin declined to 3.2% (4.3% in the previous year). The Gross Profit margin was largely flat at 15.0%, compared with 15.1% in the previous year. 【Cash Flow Quality】Comprehensive Income was ¥1.28B, slightly exceeding Net Income of ¥1.12B. The difference was attributable to valuation differences on securities of +¥0.16B, indicating that temporary accounting fluctuations are not materially distorting earnings quality. Contract assets increased to ¥0.76B (¥0.39B in the previous year, +94.6%), while contract liabilities decreased to ¥2.34B (¥2.59B in the previous year, -9.8%), indicating that progress in revenue recognition is weighted toward later stages of the process. 【Investment Efficiency】ROE was 1.9% (2.8% in the previous year), reflecting the decline in the Net Income margin and sluggish asset turnover. Total assets increased to ¥196.01B (¥193.04B in the previous year), while Revenue declined, indicating lower asset efficiency than in the previous year. 【Financial Soundness】The Equity Ratio remained largely flat at 30.1% (30.2% in the previous year). Interest-bearing debt consisted of short-term borrowings of ¥41.41B, long-term borrowings of ¥75.91B, and bonds and other borrowings of ¥0.575B, totaling approximately ¥117.90B. Against equity of ¥59.00B, the interest-bearing debt-to-equity ratio was approximately 2.0x. Interest coverage, based on Operating Income of ¥2.04B and interest expenses of ¥0.525B, was approximately 3.9x. This level warrants monitoring with respect to debt-servicing capacity during periods of rising interest rates.

Cash Flow Analysis

As no cash flow statement has been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥21.42B, remaining largely flat compared with ¥21.70B in the previous year. Short-term borrowings increased to ¥41.41B (¥38.56B in the previous year, +7.4%), suggesting funding for working capital and inventory accumulation. Within inventories, real estate for sale declined to ¥34.58B (¥35.95B in the previous year, -3.8%), while real estate under development (work-in-process real estate for sale) increased to ¥32.19B (¥29.21B in the previous year, +10.2%), indicating continued investment in the early stages of projects. Contract assets increased to ¥0.76B, while contract liabilities declined to ¥2.34B, suggesting higher short-term funding needs associated with progress in deliveries and inspections. Overall, the Company has maintained its cash and deposits while becoming somewhat more dependent on short-term borrowings. Inventory turnover and financing costs will be key areas of focus for future cash management.

Earnings Quality

Extraordinary items were minor, consisting of Extraordinary Income of ¥0.006B (gain on sale of property, plant and equipment) and Extraordinary Losses of ¥0.008B (loss on disposal of property, plant and equipment). Accordingly, current-period profit was primarily generated by recurring business activities. The main components of Non-operating Income of ¥0.211B were subsidy income of ¥0.155B and dividend income of ¥0.024B. These items may occur each period as supplements to the earning power of the core business, but their scale is limited. Non-operating Expenses of ¥0.531B consisted almost entirely of interest expenses of ¥0.525B, which increased +40.1% from ¥0.375B in the previous year and was the primary factor causing the decline in Ordinary Income to exceed the decline in Operating Income (-19.2%). Comprehensive Income of ¥1.28B slightly exceeded Net Income of ¥1.12B, with the difference attributable to valuation differences on investment securities of +¥0.16B. No temporary accounting adjustments that materially distort the underlying business performance were identified. The adjustment from Ordinary Income to Net Income primarily reflected the ordinary tax burden of ¥0.60B in income taxes and other taxes (effective tax rate: 34.9%), with no significant distortion in earnings quality identified.

Earnings Forecast and Guidance

The Full-Year plan calls for Revenue of ¥145.00B (+4.8% YoY), Operating Income of ¥9.10B (+9.7%), Ordinary Income of ¥7.00B (+0.1%), and Net Income of ¥4.60B. Q1 progress rates were 24.3% for Revenue, 22.4% for Operating Income, 24.5% for Ordinary Income, and 24.3% for Net Income, all close to the simple one-quarter benchmark of 25%. The slightly lower progress rate for Operating Income was attributable to the decline in Subdivided Housing deliveries during the first half and the increase in SG&A expenses. Recovery in Subdivided Housing deliveries in the second half is a prerequisite for achieving the Full-Year plan. Although the earnings forecast was revised during the current quarter, the dividend forecast was not revised.

Shareholder Returns

The annual dividend forecast is ¥32, representing an increase from the previous year's actual dividend of ¥16. Against the Company's planned EPS of ¥128.61, the Payout Ratio is approximately 24.9% (¥32 ÷ ¥128.61), a conservative level. Given leverage of an Equity Ratio of 30.1% and an interest-bearing debt-to-equity ratio of approximately 2.0x, profit growth supporting dividend funding is expected to come from stable earnings in Rental and Management and Housing Distribution, as well as a recovery in Subdivided Housing deliveries. The sustainability of the dividend policy should be assessed together with trends in future Operating Cash Flow generation.

Risk Factors

1. Revenue volatility risk in Subdivided Housing: The Subdivided Housing segment recorded substantial declines of -44.1% in revenue and -78.0% in Operating Income. The business structure is highly sensitive to the timing of project deliveries, which can significantly affect Company-wide profit.

2. Risk of increased interest expense: Interest-bearing debt has reached approximately ¥117.90B, and interest expenses increased +40.1% YoY to ¥0.525B. Interest coverage based on Operating Income was only approximately 3.9x, and higher interest costs during periods of rising rates may continue to place pressure on Ordinary Income.

3. Short-term liquidity risk: Cash and deposits stood at ¥21.42B against short-term borrowings of ¥41.41B. Current assets of ¥128.31B exceeded current liabilities of ¥60.59B, securing an overall liquidity buffer. However, the increased dependence on short-term borrowings compared with the previous year warrants monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

Profitability is below the industry median on both measures, placing the Company at a somewhat weaker position within the industry in terms of margins.

Growth and Capital Efficiency

The Revenue growth rate is 9.3pt below the industry median, placing the Company among the industry’s revenue-declining companies.

Source: Compiled by the Company

Key Points from the Earnings Results

1. The progress rates against the Full-Year plan were 24.3% for Revenue, 22.4% for Operating Income, and 24.3% for Net Income, representing generally standard progress. The fact that recovery in Subdivided Housing deliveries in the second half is a prerequisite for achieving the plan is a structural point of focus identifiable from the earnings data.

2. Higher revenue and profit in Rental and Management and Housing Distribution (Existing Homes) offset the profitability gap between segments. The structural shift toward stock-based businesses is supporting Company-wide performance.

3. The increase of +40.1% YoY in interest expenses caused the decline in Ordinary Income to exceed the decline in Operating Income. Under interest-bearing debt of approximately ¥117.90B, trends in interest costs should be monitored as a structural factor influencing future margin trends.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly available 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: ¥1,541–¥1,632 at ±1% for the cost of equity, and ¥1,583–¥1,587 at ±0.1 for ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to tax burdens, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income: 51%). This value reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
• Because 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, resulting in a timing gap 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 / Interest rate reference month: 2026-06 / This value does not forecast or guarantee future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 discretion and responsibility, and you should consult a professional advisor as necessary.

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