FY2027 forecast: lower revenue and profit as large-project revenue recognition is spread out; Q1 to provide an initial check against the plan

FY2026 benefited from steady demand related to lifelines, as well as strong performance in automotive, semiconductor and telecommunications-related businesses, resulting in revenue of ¥45,220 million, operating profit of ¥4,433 million, ordinary profit of ¥4,713 million and net income of ¥3,293 million. By contrast, the company forecasts FY2027 revenue of ¥41,000 million, operating profit of ¥4,000 million, ordinary profit of ¥4,200 million and net income of ¥2,900 million, representing expected declines of 9.3% in revenue and 9.8% in operating profit year on year.

For FY2027, the company cites the spreading out and lengthening of the revenue-recognition timing for large projects received in FY2026 as a factor behind the expected revenue decline. Accordingly, the decline in FY2027-Q1 revenue should not immediately be interpreted as a deterioration in demand. It will be necessary to assess the level maintained against revenue of ¥8,680 million and operating profit of ¥790 million in the year-earlier quarter, while also checking whether unrecognized projects remain in the order backlog.

The company has also consistently explained that the delivery and completion of construction projects are concentrated in the third quarter, resulting in seasonality in which revenue and profit are weighted toward the second half. A simple comparison of FY2027-Q1 with one-quarter of the full-year forecast is therefore inappropriate. In Q1, the focus should be on year-on-year revenue and operating profit, orders received, order backlog, and the expected completion timing of major projects, to assess whether the company’s assumption of second-half weighting and spread-out recognition of large projects is consistent.

At the next results announcement, the key issue will not be limited to whether the full-year forecasts of ¥41,000 million in revenue and ¥4,000 million in operating profit are maintained. The reliability of the plan will depend on whether the company provides specific disclosure on the size of projects expected to be recognized as revenue during FY2027 from the order backlog, construction progress, assumptions for raw-material prices and labor costs, and the impact of longer project durations on gross margin.