Whether seasonality can absorb the widening loss in FY2027-Q1

FY2027-Q1 revenue rose 14.0% year on year to ¥37,677 million, but the operating loss widened to ¥910 million from ¥603 million a year earlier, an increase of ¥307 million. The ordinary loss was ¥861 million, and the net loss attributable to owners of the parent was ¥711 million. The full-year forecasts are revenue of ¥240,000 million, operating profit of ¥15,000 million, and net profit attributable to owners of the parent of ¥10,000 million. No revision to the earnings forecast had been identified as of Q1.

The company has a high proportion of projects for government agencies and local authorities, with revenue and profit concentrated in Q4 and results through the interim period tending to be low. It would therefore be premature to conclude that the full-year plan will be missed based solely on the Q1 operating loss. However, FY2026-H1 generated operating profit of ¥1,145 million. To exceed that in FY2027-H1, the company must first cover the ¥910 million Q1 loss and then generate more than ¥2,055 million in standalone Q2 operating profit. Even merely returning to profitability in H1 requires standalone Q2 operating profit of more than ¥910 million.

Achieving the ¥15,000 million full-year operating profit forecast requires ¥15,910 million in cumulative operating profit in Q2-Q4 after reflecting the Q1 operating loss. Although the plan assumes that revenue will be generated in H2 from the substantial order backlog, profitability of construction work, costs for addressing defects, and improved profitability at overseas subsidiaries must all progress at the same time. In the next results announcement, the key checks for assessing the feasibility of the full-year plan are whether H1 operating profit exceeded the ¥1,145 million recorded a year earlier and whether standalone Q2 profit reached ¥2,055 million.

At present, no FY2027-H1 operating profit target, H1 progress rate, or quarterly profit plan for Q2 onward has been disclosed. The full-year forecast alone makes it difficult to distinguish a temporary loss caused by seasonality from continued deterioration in the profitability of construction and overseas projects. The H1 results will therefore need to explain, in addition to first-half revenue and operating profit, the profit required during the remaining period to achieve the full-year forecast and when revenue from major projects is expected to be recognized.