Low first-quarter progress raises the bar for a recovery in the second half

Revenue in the first quarter of the fiscal year ending March 2027 was ¥15,175 million, operating profit was ¥434 million, ordinary profit was ¥550 million, and net profit attributable to owners of the parent was ¥424 million. Year on year, revenue fell 17.1%, operating profit fell 78.8%, ordinary profit fell 73.6%, and net profit fell 71.5%, with the decline in profit substantially exceeding the decline in revenue.

The operating margin fell to 2.9% in the first quarter. In the same quarter a year earlier, revenue was ¥18,302 million and operating profit was ¥2,050 million, implying an operating margin of approximately 11.2%, so the margin declined by approximately 8.3 percentage points over the year. The company explained that construction schedules were broadly on track, but revenue declined because construction progress was slow in the first quarter, which reduced gross profit and consequently weakened operating profit and below.

The full-year forecasts are revenue of ¥75,000 million, operating profit of ¥4,000 million, ordinary profit of ¥4,500 million, and net profit of ¥2,750 million, unchanged from the initial forecasts. First-quarter results represented 20.2% of the full-year revenue forecast, 10.9% of the operating profit forecast, and 15.4% of the net profit forecast. Because construction revenue can be recognized unevenly by quarter, it is too early to conclude from these figures alone that the full-year targets will be missed, but the fact that operating profit progress was only about half the pace of revenue progress is significant.

Simply dividing the annual plan in half gives cumulative first-half benchmarks of ¥37,500 million for revenue, ¥2,000 million for operating profit, and ¥1,375 million for net profit. These are mechanical benchmarks for comparison, not the company’s quarterly plan. If these levels are not reached in the second quarter, the revenue and profit required in the third and fourth quarters will become even greater, making it necessary to determine whether the current forecasts can be explained solely by the delayed recognition of construction revenue.

At the next results announcement, it will be important to review not only the qualitative explanation that construction progress was slow, but also completed construction revenue in the construction business, the earnings of the steel structures and port businesses, and the recovery in gross profit margins. Key points will be whether cumulative first-half operating profit recovers to around ¥2,000 million and whether the company discloses the amount of construction revenue expected in the second half and profitability improvement measures as support for maintaining the ¥4,000 million full-year operating profit forecast.