1718.T

Company Overview & Group Structure

• Miki Kogyo was founded in January 1962, with 590 consolidated employees as of period end, an increase of 19 employees year-over-year aligned with business expansion.
• Core business lines include construction work, civil engineering work, gas exterior/interior piping equipment work, plumbing and HVAC work, real estate leasing/management, and renewable energy. Subsidiaries cover Sekisui Heim unit housing, custom-built wooden housing, gas service shop operation/equipment work, and renovation-focused construction work (Hyō Komuten, acquired in August 2024 and included in full-year results for the first time in this period).
• The company reports results across two core segments: Construction and Housing, aligned with group company business divisions.

2025 Fiscal Period Performance Highlights

• Both revenue and profit hit multi-decade highs, with ordinary profit reaching a 9-year record. The company revised its full-year outlook twice upward during the period: initial guidance of 35.0 billion yen revenue / 1.5 billion yen ordinary profit was first revised to hold revenue flat and lift ordinary profit to 1.9 billion yen, then revised again to the final actual result of 36.151 billion yen revenue / 2.56 billion yen ordinary profit. Upward revisions were driven by improved profitability from design changes and additional work on government-led civil engineering projects, as well as improved budget accuracy for late-stage work.
• Balance sheet movement was driven by temporary increases in accounts receivable from completed construction and inventory for development properties: 8.684 billion yen in ending accounts receivable (up 3.373 billion yen year-over-year), with ~5 billion yen of this total tied to three large-scale ongoing projects. Approximately 6.0 billion yen of receivables are expected to be collected in April and May of 2026. Inventory increased 1.494 billion yen to 8.647 billion yen, with ~5 billion yen tied to three income-producing condominium development projects: the Kawaguchi City, Saitama project was sold in January 2026, the Tamatsukuri, Osaka project is contracted for sale in Q3 2026, and the Showa-machi, Kita Tokyo project is contracted for sale in fiscal 2027, so the temporary inventory increase will resolve as these sales close.

Shareholder Return

• The company maintains a base policy of targeting a consolidated payout ratio of 30% or higher, balancing stable dividends and retained earnings for future growth. For fiscal 2025, the company increased the interim dividend from 100 yen to 150 yen per share, and plans to pay a year-end dividend of 200 yen per share including a 50 yen special dividend, subject to shareholder approval. The company also completed a 0.16 billion yen share repurchase in February 2026, and plans to continue exploring additional total return methods for shareholders. For fiscal 2026, the company currently plans a full-year dividend of 300 yen per share.

Mid-Term Management Plan (2024-2028) Progress

• The mid-term plan sets 2028 fiscal year targets of 40.0 billion yen consolidated revenue, 25.0 billion yen parent-only revenue, 5.7% consolidated operating margin, and 8% parent-only operating margin. Key progress updates on core initiatives are below:
  • Wage System Reform & Human Capital Management: The company is targeting a 1 million yen increase in average annual employee salary, with a new wage system launching in April 2026. The new system splits base pay into seniority-based pay and performance-based pay to reward high-performing employees, introduces a profit-sharing bonus structure that adds 2 extra months of bonus if ordinary profit margin exceeds 8%, and sets an average annual salary target of 7 million yen (up from the current ~6.09 million yen). The company has also expanded training, improved welfare and health initiatives (including regular health seminars for employees and partner firm staff), introduced a mentorship program for new hires that cut early turnover significantly, moved to annual goal-setting with bi-annual progress check-ins for more accurate performance evaluation, and is updating policy to allow hourly paid vacation leave in response to employee feedback.
  • Energy Storage Business Entry: Over 2 years, the company has built out the acceptance and construction framework for energy storage projects, with construction allowed to start from fiscal 2026, and the business is ready to contribute to revenue and profit. Two energy storage facilities will break ground this year, with completion targeted for fiscal 2027. The company set revenue targets of 1.5 billion yen for fiscal 2027 and 2.0 billion yen for fiscal 2028, with most projects developed for third-party sale with Miki Kogyo retaining maintenance and management services. Site selection is prioritized based on grid interconnection costs, which can range from several million yen to over 0.1 billion yen per project.
  • Tokyo Branch Strengthening: The Tokyo branch entered its 4th year of operation, with partner firm development progressing and the single-building condominium development business on track to turn profitable starting in fiscal 2026. Targets are set at 3.0 billion yen revenue / 0.21 billion yen ordinary profit for fiscal 2026, 3.7 billion yen revenue / 0.27 billion yen ordinary profit for fiscal 2027, and 5.0 billion yen revenue / 0.39 billion yen ordinary profit by the end of the mid-term plan.
• Additional mid-term plan progress:
  • Core business: Continued focus on securing large-scale waste incineration plant and medical facility equipment work: the Nishiwaki-Taka waste disposal plant is on track for completion in June 2026, and the company recently secured an 8.0 billion yen order for the Awaji Island wide-area waste processing facility, with a large pipeline of upcoming replacement projects for aging waste incinerators in the Kinki region. Two large hospital equipment projects are currently under construction in Hyogo, with accumulated experience supporting continued future order growth.
  • New business development: The company is currently in discussions for a capital participation in one construction firm with an established construction framework, to expand delivery capacity for the Tokyo market and new business lines. The company also continues to explore M&A opportunities to drive business and profit expansion.
  • Digital transformation: Continues to implement ICT and drone solutions for labor saving in construction, and is progressing digitalization of personnel data to track employee certifications.
  • Work style reform: Targets 120 annual days off, enforces a monthly overtime cap of 40 hours to prevent overwork, and continues health-focused initiatives.

• For the 2026 December fiscal year, the company guides 40.0 billion yen in consolidated revenue, representing a 10.6% year-over-year increase, and 1.8 billion yen in consolidated ordinary profit, representing a 29.7% year-over-year decrease compared to the record 2025 fiscal year result.
• Construction Segment guidance: Expects continued favorable order conditions, with solid revenue growth driven by steady delivery of carry-over work. Key priorities are completing carry-over projects and securing new orders for future periods, selling the two remaining pre-contracted income condominiums, and driving growth through new market development (energy storage business entry and Tokyo market expansion).
• Housing Segment guidance: Expects flat to slightly down revenue and profit, reflecting the potential impact of rising prices and interest rates on consumer purchase behavior. Key priorities are expanding product lineup to meet diversifying customer demand, actively securing high-quality residential development lots, launching and promoting Sekisui Chemical's new line of high-performance, lower-priced unit houses, and continuing to test the new no-brand "Ie-tochi Terrace" store format in shopping malls to attract customers looking for homes and land, to drive broader demand discovery.
• Capital efficiency & stock price-focused management: The company recognizes the high correlation between ROE and PBR, and identifies the current PBR of ~0.5x (below 1x) as a key issue to address. The company plans to improve PBR through combined improvements to PER and ROE: it will work to clearly demonstrate growth potential to the market to improve PER, and focus on efficient, profitable operations to improve ROE. Additional initiatives include optimizing the business portfolio by increasing weight on high-profit businesses, improving capital efficiency, reducing capital costs, strengthening IR activities, actively exploring M&A opportunities, and leveraging financial leverage for growth. Share repurchase has already been implemented, with additional capital structure initiatives under consideration.

For the 2025 December year-end fiscal period, total consolidated segment revenue was 36.151 billion yen, with the following breakdown by segment:

1. Construction Segment: Revenue of 22.572 billion yen, accounting for 62.4% of total consolidated revenue. Segment profit was 1.963 billion yen. This segment achieved both year-over-year revenue and profit growth, with additional design changes and extra work on large-scale projects adding 1.143 billion yen in incremental profit this period. Received orders reached 12.472 billion yen (up year-over-year), completed construction reached 17.221 billion yen (up year-over-year), and carry-over work-in-progress was 13.963 billion yen at period end. Post-period-end, the company received an additional ~8 billion yen large-scale joint venture order, pushing current carry-over work above prior year levels.
2. Housing Segment: Revenue of 13.330 billion yen, accounting for 36.9% of total consolidated revenue. Segment profit was 0.599 billion yen, up significantly from 0.310 billion yen in the prior year, achieving strong year-over-year profit growth driven by increased new home sales and steady renovation order acquisition. This segment grew incremental profit by 0.289 billion yen year-over-year.
3. Other Businesses: Revenue of 0.249 billion yen, accounting for 0.7% of total consolidated revenue, with segment profit of 0.01 billion yen.

Total consolidated segment profit for the period was 2.572 billion yen, with both core segments growing profit year-over-year. Consolidated operating profit for the full period was 2.583 billion yen, and consolidated ordinary profit reached 2.56 billion yen, up more than 120% year-over-year, hitting the highest level in 9 years with an ordinary profit margin of 7.1%, an improvement from prior periods.

• Construction industry operational risks: Securing subcontractor capacity has become increasingly challenging, and raw material and labor costs continue to rise, creating ongoing pressure on profitability. Summer high temperatures and working hour reductions from work style reform are reducing available construction capacity, leaving little spare capacity for additional projects.
• Macroeconomic and supply chain risks: Ongoing overseas conflicts continue to disrupt raw material procurement, drive fuel price increases and yen depreciation, which have amplified impacts on general prices in recent periods, creating downside risk for profitability. The income-producing single-building condominium business is highly sensitive to economic trends, and the current unstable global geopolitical and economic environment creates uncertainty for future demand, requiring careful monitoring and cautious project execution.
• Balance sheet and interest rate risks: The company financed the temporary increase in working capital from long settlement periods for progress billing construction projects and pre-development of condominiums with short-term borrowing. Market interest rates (including TIBOR and local bank short-term prime rates) have risen, increasing interest expense for the company. Going forward, the company will prioritize avoiding unnecessarily long settlement periods for construction projects to reduce this interest rate exposure.
• Housing market risks: Rising land prices and construction costs have increased single-family home prices, and rising overall prices and mortgage rates may negatively impact consumer housing demand, creating uncertainty for housing segment performance. The company's developed residential lots have sold well in 2025, leaving few available lots for future sale, making securing new high-quality development lots a critical priority to avoid revenue headwinds.

No question and answer section was included in the provided transcript.