FY2027-Q1 showed front-loaded operating profit, but revenue progress needs to be confirmed in H1

Consolidated revenue in FY2027-Q1 was ¥6,814 million, up 3.0% year on year. Operating profit was ¥616 million, ordinary profit was ¥780 million and net profit attributable to owners of the parent was ¥650 million, representing increases of 60.1%, 84.5% and 126.6%, respectively. Profit growth outpaced revenue growth, taking the Q1 operating margin to approximately 9.0%, an improvement of about 3.2 percentage points from approximately 5.8% in the same quarter of the previous year.

A simple calculation of Q1 progress against the full-year forecasts gives revenue of 21.1% (¥6,814 million ÷ ¥32,300 million) and operating profit of 33.8% (¥616 million ÷ ¥1,820 million). Revenue is below the 25% benchmark for an evenly distributed year, while operating profit is above it. However, the company has disclosed seasonality, with completion and handover of projects concentrated in the fourth quarter, so Q1 revenue progress below 25% alone does not indicate a shortfall for the full year. In FY2027-H1, it will be necessary to confirm whether revenue approaches half of the full-year forecast or whether excessive project concentration remains in the second half.

The factors behind Q1 revenue growth were construction of a large power-related project under the Sapporo branch and steady progress on ground-improvement work for an LNG processing plant site by the US subsidiary. Meanwhile, unexpected costs for sludge disposal at a piling project in the Tokyo metropolitan area reduced the project margin. Ordinary profit also included ¥95 million in foreign exchange gains, so the entire ¥164 million difference between operating profit of ¥616 million and ordinary profit of ¥780 million does not represent improvement in the core business.

In FY2027-H1, it will be necessary to distinguish whether the US and Sapporo large-scale projects that lifted Q1 profit will continue to progress, and whether the additional costs at the Tokyo metropolitan piling project were one-off and have subsided. Even if operating profit maintains the Q1 pace, achievement of the full-year operating profit forecast of ¥1,820 million will depend on project profitability and handovers in the second half unless it is accompanied by an accumulation of revenue. The company’s earnings forecasts had not been revised as of Q1, so the interim results should be assessed together with revenue, operating profit, foreign exchange gains and losses, and progress on large-scale projects.