1716.T

• Interim Financial Results Overview
  • Both public and private construction projects performed generally well, with total consolidated sales reaching 10.893 billion yen, a 1.1% increase year-over-year.
  • Gross profit improved to 3.567 billion yen due to cost control, and despite selling, general and administrative expenses increasing to 2.171 billion yen, operating profit reached 1.395 billion yen, a 16.1% increase year-over-year.
  • A 336 million yen special gain from the sale of Toyoco Co., Ltd. shares was recorded, leading to net income attributable to parent company shareholders of 1.213 billion yen.
  • Quarterly performance was stable: Q1 sales were 5.475 billion yen with operating profit of 755 million yen; Q2 sales were 5.418 billion yen with operating profit of 640 million yen, both exceeding year-ago levels.
• Key Construction Project Highlights
  • The company demonstrated strong capability to deliver safe, high-quality, on-schedule construction even under highly constrained conditions such as fire-sensitive sites, traffic-regulated areas, and underwater work.
  • Notable completed projects include: bridge repair on the Tohoku Expressway in Fukushima Prefecture using the company's Jetmaster water jet robot; underwater cutting and drilling work for a port facility in Yamaguchi Prefecture using hydraulically driven technology that reduces oil leakage risk; and laser-based internal pipe surface treatment for a biomass power plant in Wakayama Prefecture, which reduces dust and secondary waste.
• Mid-Term Management Plan (Medium-Term Management Plan 2027, covering 2025-2027) Progress
  • Overall Strategy: The plan is structured around three core business goals (strengthening advantages of existing businesses, expanding existing businesses, developing and expanding new businesses) supported by an organizational strategy focused on talent development and system building. The 2025 June term missed sales and profit targets due to reduced highway renewal-related work and rising costs, but the company continues to focus on profitability improvement and construction system strengthening as demand remains solid.
  • Business Strategy:
    • For existing business advantage strengthening: The company is developing new construction methods that balance improved quality and shorter construction periods, and has established regional oversight functions to improve on-site responsiveness via smoother information sharing and allocation of personnel and equipment.
    • For existing business expansion: The company is strengthening its system in the western Japan region, having already acquired land for base expansion to prepare for future supply capacity growth, and will expand the supply system gradually based on demand trends.
    • For new business development: The laser construction method is in the practical verification phase, with ongoing testing and operational refinement via actual on-site construction; the company is prioritizing know-how accumulation and standardization to prepare for future expansion, and continues to explore other new business areas.
  • Organizational Strategy:
    • The company focuses on three pillars: passing down and evolving specialized expertise, developing management talent, and providing opportunities for new business creation. It is advancing core system renewal for standardization, efficiency, data utilization and digital transformation, with phased ERP introduction to build a group-wide operational system.
    • It has expanded training programs including coaching and compliance to strengthen management capability, and is strengthening overall group management that prioritizes safety and compliance.
    • The Business Creation Department continues to explore and verify themes for new business development to support future growth. Personnel base has grown steadily: on-site construction staff increased from 323 in the 2020 June term to 401 in the 2025 June term, with total company staff reaching 592. The company has implemented base salary increases (a uniform 10 thousand yen increase for regular employees on top of regular pay raises in April 2025, with corresponding increases for non-regular staff) to address tight labor markets and rising prices, and will focus on talent retention and development going forward, particularly for frontline management roles.
  • M&A Strategy:
    • The company pursues M&A aligned with its core strategic goals: it is conducting due diligence on peer companies that can generate synergy for existing business advantage strengthening.
    • It is exploring and holding discussions with companies that can complement the construction process before and after the company's current scope of work, and is continuing to search for candidate targets in the western Japan region to support market expansion.
    • It is exploring potential partners to accelerate the business expansion of the laser construction method to support new business development.

• Full-year 2026 June term consolidated sales guidance is maintained at 20.5 billion yen, representing a 1.3% increase from the previous year's actual result of 20.228 billion yen. The company expects steady demand from public infrastructure maintenance and renewal (primarily roads and bridges) and consistent private construction demand, and will work steadily to hit the target.
• Full-year operating profit guidance is revised upward to 1925 million yen, a 16.9% increase from the previous year's actual result of 1647 million yen, reflecting ongoing cost reduction and profitability improvement progress seen in the interim period.
• Full-year ordinary profit guidance is revised upward to 2055 million yen, a 14.7% increase from the previous year's actual result of 1791 million yen.
• Full-year net income guidance is revised upward to 1643 million yen, a 23.8% increase from the previous year's actual result of 1327 million yen. The upward revision primarily incorporates the special gain from the Toyoco share sale, alongside improvements in core operating and ordinary profit.
• Dividend guidance is maintained at 40 yen per share, unchanged from the previous year. The company's long-term shareholder return policy targets a payout ratio of 30% or higher, with gradual dividend increases aligned with earnings growth. The company chose to keep the dividend steady in the current term to balance stable returns with future growth investment, and remains committed to increasing return levels gradually in line with profit growth under the mid-term plan.

1. Cutting and Drilling Construction Segment: Sales amounted to 10.571 billion yen, a 0.9% increase year-over-year. Segment profit reached 1.949 billion yen, a 9.8% increase year-over-year. This segment accounts for 97.04% of total consolidated revenue. Within this segment, public investment-related sales totaled 7.491 billion yen, accounting for 70.9% of the segment's total revenue, with highway-related sales stable at approximately 3.011 billion yen; private capital investment-related sales totaled 3.081 billion yen, remaining at a low level compared to 2024. 2. Building Maintenance Segment: Sales amounted to 0.321 billion yen, a 6.6% increase year-over-year, driven by new orders from major developer projects. This segment accounts for 2.96% of total consolidated revenue. Segment profit was 23 million yen, a 14.0% decrease year-over-year, due to increased personnel and administrative costs associated with system strengthening. Total reported segment profit across both segments was 1.973 billion yen.

• Fluctuations in raw material costs and personnel expenses remain key external variables that impact profitability; the company will continue to focus on project selection and construction system strengthening to manage this uncertainty.
• Current performance remains below the quantitative targets set in the mid-term management plan, and the company acknowledges the existing gap between current results and the plan's end goals, requiring accelerated profitability improvement efforts to close the gap.
• The building maintenance segment is facing profitability pressure near-term, as increased investment in system strengthening has pushed up costs amid revenue growth.

The full structured answers to all submitted questions are not included in the available transcript. The list of questions covered in the Q&A section is as follows: Q: Is there a possibility of revising the dividend after recording the special gain?

A: [Answer not included in available transcript] Q: What factors drove the recovery of profitability in the interim period?

A: [Answer not included in available transcript] Q: What initiatives are you implementing to pass cost increases through to project pricing?

A: [Answer not included in available transcript] Q: What is the current sales performance of the laser construction method?

A: [Answer not included in available transcript] Q: What is the business trend and order outlook for highway projects?

A: [Answer not included in available transcript] Q: What is the progress of restoration work including projects in the Noto Peninsula area?

A: [Answer not included in available transcript] Q: What is your policy regarding treasury share purchases?

A: [Answer not included in available transcript] Q: Will the business relationship with Toyoco continue after selling your stake in the company?

A: [Answer not included in available transcript] Q: What is the current progress of your M&A activities?

A: [Answer not included in available transcript] Q: What are your expansion and strengthening plans for the western Japan market?

A: [Answer not included in available transcript] Q: What initiatives are you pursuing to develop new businesses?

A: [Answer not included in available transcript] Q: What is your outlook for highway and bridge repair projects and urban civil engineering demolition work?

A: [Answer not included in available transcript] Q: What is the status of your recruitment activities and talent development environment?

A: [Answer not included in available transcript]