ASANUMA CORPORATION Q2 FY2026 earnings call

Industry Context

• Public construction investment remains solid, driven by ongoing demand for renewal of aging infrastructure.
• Overall private construction investment is steady: residential investment has stagnated as a correction after last year's rush ahead of energy efficiency code mandates, but non-residential investment remains supported by strong corporate capital expenditure appetite.

Mid-Term 3-Year Plan Progress

• The plan is now in its second year, with 6 key strategic themes and KPIs set for each; all initiatives are progressing steadily toward targets. Updates for 4 core themes are as follows:
  • Renovation Business Strengthening: Asanuma is focusing on growth in high-demand renovation projects, leveraging unique proprietary eco-friendly technologies centered on earth-based construction. The company recently secured patents for two new earth-based techniques:
    • Kantsuchi Blocks: Blocks made only from natural soil and water, with no artificial cement; already piloted in client projects and used in the company's Nagoya branch reception room for client demonstration.
    • 3D Wooden Earthen Walls: Layered construction using natural materials (soil, straw, sawdust) that supports custom coloring for high design flexibility; one implementation was part of a store that won the 2025 Good Design Award. The company will continue integrating these unique technologies to deliver high-value-added renovation proposals.
  • Talent Acquisition, Retention and Development: New graduate hiring for April 2025 hit target, and hiring for April 2026 is tracking satisfactorily with no major recruitment shortfalls to date. Initiatives include:
    • Strengthened official social media to showcase completed projects, boost branding and improve external awareness.
    • Hosted an internal event for ~100 employees at the Osaka-Kansai Expo 2025 Dutch Pavilion (which Asanuma constructed) to educate staff on the project's circular, reusable construction design, boosting employee engagement and cohesion. The company will continue these activities to improve internal and external awareness and stakeholder attachment.
  • DX Promotion: DX is a core priority for productivity improvement. A company-wide DX Literacy Talent Development Program has been launched: all employees complete an initial assessment to identify their current DX skill level and gaps, then complete e-learning training and retake the assessment until they hit target scores, to raise overall DX awareness and capability. The company is also progressing individual DX initiatives on schedule, and is conducting trial use of AI for technical proposals and design work.
  • Environmental and Social Contribution: The company secured third-party assurance from Socotec Certification Japan for its FY2024 GHG emissions calculation, and plans to obtain SBT certification in FY2025, after which it will set more ambitious emissions reduction targets. Current CO2 reduction progress is on track for 2030 and 2050 targets: Scope 1 and 2 emissions intensity and total emissions are progressing as planned. FY2024 Scope 3 Category 11 emissions hit the target early due to temporary factors (fewer completed handover projects and larger average project size reducing total counted emissions), but BEI (building energy efficiency index) has still reduced permanently, confirming ongoing CO2 reduction progress. Management will consider raising targets if the current low-emission trend continues.

Shareholder Return

• The current mid-term plan maintains a policy of a 70% or higher payout ratio, with no change to this commitment. For FY2025, the planned total dividend is 41.5 yen per share, consisting of a 16 yen interim dividend and 25.5 yen year-end dividend.

On a consolidated basis, Asanuma Corporation reported the following second quarter results: Total order intake was 132.731 billion yen, up 69.2% year-over-year, representing 79.2% of the original full-year plan. Net sales were 86.875 billion yen, up 21.1% year-over-year, representing 51% of the full-year plan. Gross profit was 10.026 billion yen, up 28.5% year-over-year, with a gross margin of 11.5% (up 0.6 percentage points year-over-year). Operating profit was 4.541 billion yen, up 50.5% year-over-year, with an operating margin of 5.2% (up 1.0 percentage point year-over-year). Profit attributable to parent company shareholders was 3.07 billion yen, up 66.1% year-over-year, representing 64.4% of the full-year plan. On a standalone basis, total combined construction and civil engineering order intake was 128.025 billion yen, split between 28.65 billion yen from government clients (22% of total standalone orders, up 260.9% year-over-year) and 99.375 billion yen from private clients (78% of total standalone orders). For construction orders by use case: warehouses account for the largest share, followed by accommodation/hotel facilities at 24%, multi-family housing at 16%, then offices and education/research facilities. For civil engineering orders: 42% from power/transmission line projects (driven by a large new intake), 23% from land development, and 16% from road projects. For construction orders by type: renovation business order intake remained solid, with office projects accounting for the largest share of renovation orders, followed by factory projects.

• The full-year order intake target was upwardly revised from 151.5 billion yen to 167.5 billion yen, an increase of 16 billion yen, driven by stronger than expected second quarter order intake from large construction and civil engineering projects.
• No revisions have been made to the existing full-year net sales and profit guidance as of the second quarter. Management will disclose any necessary revisions promptly if required.
• The planned FY2025 total dividend of 41.5 yen per share remains unchanged, and the company will maintain its 70%+ payout ratio commitment.

• Soaring construction costs are the primary ongoing risk: elevated construction material prices, combined with rising labor costs, equipment costs and transportation costs, have driven broad cost increases.
• Rising costs may lead clients to revise, delay or cancel planned capital expenditure projects, creating downside risk to future order intake and revenue.
• Labor cost growth is being driven by two persistent structural factors: stricter overtime work regulations and widespread labor shortages caused by the aging of the construction workforce, and this trend is expected to continue, requiring ongoing monitoring.
• The industry continues to face structural challenges of severe labor shortages and tighter working time regulations, which create ongoing difficulties securing sufficient construction execution capacity.

Q: Given the very strong second quarter progress, and the typical construction industry pattern of booking most profit in the second half, will there be an upward revision to the full-year profit plan, and could that lead to an upward revision to the year-end dividend? / A: As of the second quarter, no changes have been made to the originally announced full-year net sales and profit guidance, though the full-year order intake target was already upwardly revised by 16 billion yen to 167.5 billion yen consolidated. Management will promptly disclose any future revisions to profit or dividend plans if they become necessary, and will maintain the existing policy of a 70%+ payout ratio.

Q: Despite the current strong earnings performance, what key challenges and risks do you see in the current market environment? / A: While order demand remains very strong, the biggest ongoing challenge is broadly elevated construction costs driven by high sticky material prices and rising labor, equipment and transportation costs. In particular, labor cost growth is being driven by structural factors: overtime regulation changes and aging-driven labor shortages, and this trend is expected to continue. Management notes that sustained cost increases could lead private clients to delay or cancel planned capex projects, which is a key downside risk that will be closely monitored going forward.