FY2027-Q1 showed a significant improvement, but H1 will determine progress toward the full-year earnings plan

Consolidated revenue in FY2027-Q1 was ¥34,674 million, up 11.6% from ¥31,076 million in the year-earlier period. Operating income improved by ¥1,007 million, from ¥4 million to ¥1,011 million, while ordinary income was ¥774 million and net income attributable to owners of the parent was ¥188 million. The company had reported an interim net loss of ¥303 million in the year-earlier period, so the return to profitability at every stage of the income statement indicates a recovery from the deterioration in project profitability that had become apparent in the previous fiscal year.

By segment, civil engineering generated revenue of ¥17,335 million and operating income of ¥68 million, while building operations generated revenue of ¥16,552 million and operating income of ¥854 million. In the year-earlier period, civil engineering reported an operating loss of ¥172 million and building operations operating income of ¥62 million, so both segments improved. However, building operations accounted for approximately 84% of operating income, meaning that the company-wide Q1 improvement depended heavily on the recovery in building profitability. In FY2027-H1, the focus will be on whether building profitability can be maintained and how much additional profit civil engineering can generate from its Q1 operating income of ¥68 million.

The company’s FY2027 forecast calls for revenue of ¥157,000 million, operating income of ¥6,800 million, ordinary income of ¥8,000 million and net income attributable to owners of the parent of ¥4,700 million. Progress as of Q1 was 22.1% for revenue, 14.9% for operating income, 9.7% for ordinary income and 4.0% for net income, indicating that earnings progress is lagging revenue progress. It will be necessary to review H1 earnings levels, provisions for losses on construction contracts and any additional impairment losses alongside the seasonal pattern of the construction industry, rather than attributing the results solely to quarterly seasonality.

The company did not prepare a quarterly statement of cash flows for Q1, so it is not possible to determine whether the earnings improvement was accompanied by cash collection. In FY2027-H1, it will be important to see whether the company discloses not only cumulative revenue and operating income, but also the run-off of the order backlog arising from orders received of ¥23,280 million, gross profit, operating cash flow and profitability by building and civil engineering. Even if the full-year forecast is maintained, H1 should clarify whether the amount of profit required in the second half to meet the plan has changed.