FY2027-Q1 saw lower revenue, but profit progress was relatively strong; focus turns to testing the full-year earnings decline plan

FY2027-Q1 revenue was ¥76,188 million, down 8.7% year on year, while operating profit was ¥5,121 million, down 0.9%. Ordinary profit, however, was ¥5,225 million, up 3.8%, and net income attributable to owners of the parent was ¥3,679 million, up 6.7%. At the final stage, including non-operating gains and losses and the tax burden, the result was more resilient than operating profit. The operating margin was approximately 6.72%, calculated as ¥5,121 million ÷ ¥76,188 million, up approximately 0.53 percentage points from approximately 6.19% in the year-earlier period.

The full-year forecasts remain unchanged at revenue of ¥360,000 million, operating profit of ¥21,100 million, ordinary profit of ¥20,800 million, and net income attributable to owners of the parent of ¥14,500 million. Compared with FY2026 actual revenue of ¥358,697 million, the plan assumes broadly flat revenue, but a 12.8% decline in operating profit from ¥24,199 million to ¥21,100 million and a 25.1% decline in net income from ¥19,361 million to ¥14,500 million. Accordingly, FY2027-H1 should be assessed against simple half-year benchmarks of revenue of ¥180,000 million and operating profit of ¥10,550 million, separating the recovery in revenue from the maintenance of margins.

The factors behind the Q1 revenue decline were lower revenue from certain large port construction projects in domestic civil engineering and the absence of revenue from large warehouses and logistics facilities recorded in domestic building construction in the previous year. In contrast, domestic building construction posted higher segment profit as low-margin projects declined, while overseas operations also recorded higher profit, helped by progress on large port construction projects. Segment-level profit improvements offset the decline in revenue, but the contribution of each factor and the bridges for gross profit and SG&A expenses have not been disclosed.

The company describes FY2027 as a year in which it will process its substantial order backlog while accelerating investment in personnel and DX. As of Q1, however, it had not provided the specific amounts of those investments, their impact on SG&A expenses, or the productivity gains generated by them. In FY2027-H1, the key points to assess will be whether the operating margin can remain at 6.5% or higher, how far overseas profit contributions can offset continued revenue declines in Japan, and how much revenue and profit have been left for the second half to achieve the full-year forecasts.