First-quarter revenue and earnings growth are tracking slightly below the full-year forecasts; sustainability to be assessed in the first half

In the first quarter of the fiscal year ending March 2027, revenue was ¥182,197 million, up 4.6% year on year, and operating profit was ¥11,110 million, up 8.1%. Ordinary profit was ¥10,543 million, up 5.0%, while quarterly net profit attributable to owners of the parent was ¥7,112 million, up 3.1%. Revenue through net profit all exceeded the year-earlier levels. However, net profit growth was limited to 3.1%, compared with 8.1% for operating profit, indicating that the improvement in profit did not flow through fully to net profit.

First-quarter progress against the full-year forecasts was 22.3% for revenue, calculated as ¥182,197 million divided by ¥818,000 million, 18.8% for operating profit, calculated as ¥11,110 million divided by ¥59,000 million, and 20.3% for net profit, calculated as ¥7,112 million divided by ¥35,000 million. Compared with the 25% represented by one quarter of the fiscal year, revenue was 2.7 percentage points lower and operating profit was 6.2 percentage points lower. Construction activity is seasonal, so it would not be appropriate to judge performance solely against a simple 25% benchmark, but it will be important to determine whether the operating profit shortfall narrows in the second quarter.

The company’s full-year forecasts are revenue of ¥818,000 million, operating profit of ¥59,000 million, ordinary profit of ¥54,000 million and net profit of ¥35,000 million, and these forecasts were maintained as of the first quarter. If the first half is simply assumed to account for 50% of the full year, the mechanical benchmarks are revenue of ¥409,000 million, operating profit of ¥29,500 million and net profit of ¥17,500 million. These are not the company’s first-half forecasts, however, but merely an even allocation of the full-year plan. The second-quarter financial results should therefore be checked quantitatively for uneven construction progress and any weighting toward the second half.

The company attributed the increase in profit in the first quarter to progress on projects on hand, including large-scale projects, improved profitability in domestic building construction, and progress on large-scale projects in Singapore and Hong Kong. By segment, domestic civil engineering generated profit of ¥7,820 million and domestic building construction generated ¥3,702 million, while overseas construction posted a loss of ¥852 million. Accordingly, for first-half operating profit to approach the simple benchmark of ¥29,500 million, it will be necessary not only for profitability improvements in the two domestic businesses to continue, but also for losses in overseas construction not to expand.

In the second quarter, we will assess not only whether the full-year forecasts are revised, but also cumulative first-half revenue, operating profit and net profit, the operating margin, segment profit, new orders and the order backlog. In particular, the first-quarter operating margin was approximately 6.1%, calculated as ¥11,110 million divided by ¥182,197 million. The key points will be whether this level can be maintained cumulatively for the first half and whether the company provides additional disclosure of a profit bridge, including losses in overseas construction.