Construction revenue is rising on large corporate projects, but the focus is on maintaining the order backlog and profit margin

Construction revenue in FY2027-Q1 was ¥18,528 million and operating profit was ¥1,785 million, up 13.4% and 2.8%, respectively, year on year. Operating profit growth was modest relative to revenue growth, putting the simple operating margin at approximately 9.6%. Although company-wide revenue increased, it is necessary to confirm whether the increase in construction volume is translating directly into profit growth in the construction business.

For comparison, construction revenue for FY2026 was ¥76,168 million, with operating profit of ¥7,746 million and an operating margin of approximately 10.2%. In FY2026-H1, revenue was ¥34,354 million, operating profit was ¥3,528 million, and the order backlog was ¥151,656 million. Accordingly, in FY2027-H1 it will be important not only to exceed the prior-year interim revenue and profit levels, but also to determine whether the margin recovers from at least the approximately 9.6% recorded in FY2027-Q1.

The order backlog declined from ¥155,665 million at the end of FY2026 to ¥147,450 million at the end of FY2027-Q1, while quarterly order intake was ¥10,313 million. The company has attributed previous profit growth to higher orders for large-scale wooden construction and other large projects, particularly from corporate customers, as well as selling-price revisions in response to materials-price fluctuations. However, it has not disclosed the amount of the benefit from price revisions or the impact of materials and labor costs. At the next results announcement, we will check interim order intake, the recovery of the order backlog, the breakdown of projects by use and customer, and whether construction periods have lengthened or additional costs have arisen.