Operating profit is ramping up more slowly than revenue.

First-quarter revenue was ¥8,733 million, representing 22.1% of the full-year forecast of ¥39,466 million. Operating profit, however, was ¥87 million, representing only 5.9% of the full-year forecast of ¥1,480 million. Against a benchmark of 25% for a simple even quarterly run rate, revenue was broadly on track, but operating profit was 19.1 percentage points below that level, indicating that revenue growth has not translated into profit.

The company cited the higher proportion of low-margin projects completed in certain project categories as the reason for the decline in operating profit. Based on the disclosed figures, the first-quarter operating margin was approximately 1.0%, down from approximately 1.3% in the same period of the previous year. However, the impact of low-margin projects and profitability differences by project category have not been disclosed, so the composition of completed projects, whether provisions for construction losses were recorded, and the status of additional costs will need to be reviewed in the 2Q cumulative results.

For the fiscal year ended March 2026, revenue was ¥39,384 million and operating profit was ¥1,369 million, compared with forecasts of ¥39,466 million in revenue and ¥1,480 million in operating profit for the fiscal year ending March 2027. While revenue growth is expected to be only 0.2%, operating profit is forecast to rise 8.1%. The full-year plan therefore assumes an approximately 0.27 percentage-point recovery in the operating margin through an improved project mix and higher profitability, rather than revenue volume growth.

As of the first quarter, the full-year earnings forecast had not been revised, and the revenue and operating profit forecasts were maintained. At the next results announcement, it will be important to assess not only whether 2Q cumulative revenue and operating profit approached the simple half-year run-rate levels of ¥19,733 million and ¥740 million, respectively, but also whether the low profitability in the first quarter was a temporary shift in completion timing or a structural issue that will persist into the second half, together with segment-level margins.