First-half profit growth has consumed most of the full-year operating profit forecast; sustainability of earnings is the focus in Q3

FY2026-H1 revenue was ¥129,672 million, down 1.2% year on year, while operating profit was ¥7,455 million, ordinary profit was ¥8,522 million, and interim net profit attributable to owners of the parent was ¥5,593 million, representing increases of 26.7%, 48.7% and 38.1%, respectively. Profit expanded despite the lack of revenue growth, with the consolidated operating margin rising approximately 1.3 percentage points from approximately 4.5% in the same period of the previous year to approximately 5.8%.

The full-year revenue forecast was maintained at ¥260,000 million, while the operating profit forecast was raised by ¥300 million from ¥7,500 million to ¥7,800 million, the ordinary profit forecast by ¥1,000 million from ¥8,400 million to ¥9,400 million, and the net profit forecast by ¥700 million from ¥5,200 million to ¥5,900 million. H1 operating profit of ¥7,455 million represents 95.6% of the full-year forecast, leaving ¥345 million still required. The remaining amounts are ¥878 million for ordinary profit and ¥307 million for net profit, so Q3 progress needs to be assessed separately at the operating and non-operating levels.

However, it would be premature to judge full-year achievement solely on the extremely high operating profit progress rate. It is important to determine whether factors that arose in H1, such as equipment and construction sales in the Energy & Solutions business, progress on large projects in the Engineering & Maintenance business, and loss reductions in the Housing and Property businesses, will continue into Q3. Ordinary profit also includes valuation gains on derivatives related to foreign exchange contracts, so it is necessary to distinguish whether growth in final profit can be explained by operating activities alone.

At the next earnings announcement, we will check nine-month cumulative revenue, operating profit, ordinary profit and net profit, as well as standalone Q3 three-month results, progress rates against the full-year forecasts, and the operating margin. The current earnings materials show the full-year forecast amounts and segment results, but do not explicitly disclose progress rates against the full-year forecasts, the assumptions underlying the earnings forecasts, or the levels required for the remainder of the year. Whether the full-year forecasts are revised again in Q3 and whether the annual dividend of ¥34 is maintained will also provide insight into earnings quality.