Revenue growth masks pressure on profit from costs and labor expenses

Consolidated revenue in FY2026-H1 was ¥19,902.915 million, up 24.9% from ¥15,936.525 million in the year-earlier period. However, operating profit fell 11.9% year on year to ¥944.551 million, while ordinary profit fell 12.1% to ¥924.078 million. Profit attributable to owners of the parent was ¥668.831 million. The decline was limited to 1.2%, helped by a ¥113.974 million gain on the sale of fixed assets related to the sale of rental real estate. The key point to confirm in the next earnings release is that revenue growth has not translated directly into profit from core operations.

By segment, construction revenue rose 45.1% year on year to ¥13,928.903 million, while operating profit fell 2.9% to ¥832.638 million. The housing business also weighed on consolidated profit, with revenue down 5.7% to ¥5,856.823 million and operating profit down 49.9% to ¥105.801 million. Other businesses saw revenue decline 3.7% to ¥117.188 million, but operating profit improved 172.5% to ¥3.481 million. Its scale was small, however, and it did not offset weaker profitability in the construction and housing businesses.

The company cited higher construction costs and increased labor expenses associated with revisions to the personnel system as reasons for the decline in profit. It has not disclosed the amounts by which materials prices, labor costs and the personnel-system revisions each affected operating profit. The operating margin in FY2026-H1 was approximately 4.7% on a calculated basis, down approximately 2.0 percentage points from approximately 6.7% in the year-earlier period. In FY2026-Q3, the focus should be on whether increases in costs were absorbed through contract prices or additional construction work, rather than simply on additional revenue recognition, and whether the increase in labor expenses is temporary or ongoing. These points should be assessed by factor, using amounts or profit margins.