DAISUE CONSTRUCTION CO.,LTD. Q4 FY2025 earnings call

Core Financial Results Highlights

• Strong order growth driven by multiple large general construction projects, with solid digestion of backlog leading to top and bottom line expansion
• Significant construction profitability improvement compared to the prior year, driving a more than doubling of consolidated operating profit
• Completed and handed over the Czech National Pavilion for the Osaka-Kansai World Expo, alongside completed projects including condominiums, medical facilities, and industrial works
• Recorded a 1.46 billion yen goodwill impairment for subsidiary Kojimagumi, a specialty rock splitting civil engineering firm acquired in 2023, because stabilizing order flow and building out the construction systems has taken longer than initially projected
• After impairment, the consolidated equity ratio remains 41.4%, which is higher than FY2024, so the negative impact to the financial base is limited

Strategic and Operational Initiatives

• Civil engineering growth for Kojimagumi: Leverage Kojimagumi's proprietary patented rock splitting method (which has superior crushing capacity, productivity, vibration/noise control vs conventional methods, and enables environmentally friendly construction) by investing Daisue Construction group resources to grow the civil engineering business while stabilizing the subsidiary's business base
• Capital and share price-focused management: The ongoing medium-term management plan targets ROE of 10%+, PER of 10x+ to achieve PBR of 1x. Recent improvements in profitability and aggressive shareholder returns have lifted ROE, active IR has pushed PER upward, and share price and PBR have both improved significantly. Management will continue working to lift corporate value.
• Sustainability: 17 materiality management KPIs are set for sustainability work; most KPIs improved from the prior period, and initiatives are progressing generally on track. Management will continue advancing solutions to sustainability challenges.
• Osaka-Kansai World Expo and Czech partnership: Daisue Construction built the Czech National Pavilion for the 2025 Expo, and has reached a basic agreement to sign a strategic partnership contract with the Czech Expo government office in April 2025. The pavilion's main hall has been named "Daisue Hall", and the company plans to run PR activities using the pavilion and jointly promote the building materials used in the pavilion domestically and internationally.
• Balance sheet and capital structure: Shortened payment terms for electronic record payables from 120 days to 60 days, repaid interest-bearing debt, and sold investment securities. Total assets decreased by 3.512 billion yen to 55.595 billion yen, with an equity ratio of 41.4%.
• Shareholder return policy: The target policy is a total payout ratio of 50%+ and DOE of 4%+. The FY2025 year-end dividend was increased 10 yen from the initial forecast to 99 yen.

The full transcript does not break out formal financial performance for separate defined product segments. By order type: 1) Overall consolidated construction: Consolidated order received: 114.727 billion yen, +21.6% YoY; Carried forward work in hand: 130.281 billion yen (over 100 billion yen); Consolidated net sales: 89.027 billion yen, +14.4% YoY; Gross profit: 8.275 billion yen, +46.6% YoY (gross margin 9.3%, +2.0pts YoY); Operating profit: 3.695 billion yen, +132.4% YoY (operating margin 4.2%, +2.2pts YoY). 2) By use case for orders: Logistics warehouses/factories saw large growth driven by large refrigerated warehouse orders; commercial facilities also grew on hotel project gains. 3) By region: Kinki and Kanto regions each account for approximately 40% of order volume, with the Kinki share increasing in the period. The civil engineering subsidiary Kojimagumi (acquired November 2023) had 1.46 billion yen of goodwill impairment recorded in FY2025.

• For FY2026 (ending March 2026): Consolidated net sales is forecast at 96.4 billion yen (+8.3% YoY), supported by the large existing carried forward work backlog
• Consolidated operating profit is forecast at 3.52 billion yen (-4.7% YoY): while construction profitability is expected to improve, rising fixed costs including personnel expenses are projected to drive a slight YoY decline, with an operating margin forecast of 3.7%
• Consolidated net income attributable to parent is forecast at 2.25 billion yen (+9.2% YoY)
• Consolidated order received is forecast at 117.3 billion yen, flat at the strong FY2025 level, based on expectations the favorable order environment will continue
• Dividend guidance for FY2026 is an annual dividend of 108 yen (54 yen interim, 54 yen year-end), which will mark 5 consecutive years of dividend increases

• The business stabilization and growth plan for Kojimagumi will require additional time to deliver results, as order flow stabilization and construction system build-out are progressing slower than the initial projection after acquisition
• Rising fixed costs (particularly personnel expenses) are expected to pressure profitability in FY2026, partially offsetting ongoing improvements in construction project profitability

The provided transcript cut off before including the full question and answer section; no completed Q&A exchanges are available for summarization.