1929.T

Company Mission and Strategic Context

• Nittoku Construction's core business focuses on ground engineering, combining civil engineering and geological expertise to deliver infrastructure solutions aligned with growing demand driven by aging domestic infrastructure and increasing natural disaster recovery needs.
• The company's brand mission "Our pride lies in what you cannot see" embodies the shared organizational commitment to critical underground and disaster recovery work that is not publicly visible.

Overall Interim Financial Performance

• Total consolidated order value hit 43.487 billion yen, exceeding the level of the past two comparable years. Total consolidated revenue reached 37.664 billion yen, also outperforming the past two years.
• Gross profit margin came in at 18.4%, 0.5 percentage points below the 18.9% forecast, resulting in operating profit of 1.794 billion yen (92% of the pre-published 1.95 billion yen target). Management attributes the miss to conservative accounting for projects with open ongoing issues under the percentage-of-completion method.
• Quarterly performance: Both Q1 and Q2 delivered stable order values above 2 billion yen. Q1 revenue was 17.297 billion yen, while Q2 revenue exceeded 2 billion yen at 20.366 billion yen. Q2 (July-September) operating profit hit 1.291 billion yen.
• Strong performance was driven by smooth construction progress at large core branches (Tokyo, Osaka) and steady progress on Noto Peninsula reconstruction work at the Hokuriku branch.

Backlog and Balance Sheet Updates

• The company achieved an all-time record level of carried-forward order backlog overall, driven by strong order intake and steady construction progress. This provides a strong base for future revenue conversion.
• Cash and deposits decreased due to increased investments: the company built new temporary offices and worker accommodations for Noto reconstruction, purchased large new equipment to expand ground improvement operations, and acquired long-term held marketable securities that increased other investment assets. Total net assets stood at 34.985 billion yen.

• Management maintains the original full-year guidance published at the start of the fiscal year: target of 77.0 billion yen in total orders, 76.0 billion yen in total revenue, and 5.0 billion yen in operating profit.
• The company will focus on accelerating construction progress, reducing costs to hit full-year targets, and improving gross profit margins through internal efficiency efforts and client negotiations over the second half of the fiscal year.
• Management will also prioritize securing new orders in the second half that will support construction volume for the next fiscal year.

By order amount (work type segment):

1. Foundation & Ground Improvement Works: 15.3 billion yen, down from the 18.285 billion yen level achieved in the 2022 comparable period, after expansionary initiatives for the segment.
2. Slope (法面) Works: 19.654 billion yen, exceeding historical performance driven by large Noto Peninsula earthquake reconstruction projects. This segment contributed 45.2% of total interim orders, and achieved 16.264 billion yen in revenue (representing 43.2% of total interim revenue), which was 116% of the prior year revenue level. It also holds an all-time high carried-forward order backlog of over 31.339 billion yen.
3. Repair Works: 5.011 billion yen in orders, with 6.207 billion yen in revenue. This segment's strong performance was driven by the newly acquired group company Asou Foam Crete Co., Ltd.'s aerated concrete business, which joined the group in April 2025. All segments achieved revenue that significantly exceeded prior year levels overall.

• The core near-term operational risk is successfully converting the all-time record carried-forward order backlog, especially the unprecedented 31.339 billion yen backlog in the slope works segment, into smooth completed construction and recognized revenue.
• Current gross profit margin is below management's initial forecast, requiring improvement efforts through the second half to meet full-year profit targets.

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