WADAKOHSAN CORPORATION Q4 FY2026 earnings call

Company Overview

• Founded 127 years ago, with core historical operations in Kobe and surrounding Hanshin region of the Kansai area; holds the top spot in number of condominium buildings supplied in Kobe for 28 consecutive years, ranked 3rd in supply volume in the Kinki region last year.
• Operates four core business segments: condominium sales, detached home sales, other real estate sales, and real estate rental, and has expanded into new areas including residential paid nursing homes and grid-scale energy storage facilities in recent years.

FY2026 Full Year (February 2026 Term) Results

• Total consolidated revenue of 42.144 billion yen, up 2.014 billion yen year-over-year; gross profit of 9.563 billion yen, down 0.192 billion yen year-over-year; operating profit of 4.988 billion yen, down 0.297 billion yen year-over-year; net income of 2.623 billion yen, down 0.498 billion yen year-over-year, resulting in higher revenue but lower profit compared to the prior year.
• Both total revenue and profit exceeded initial full-year plan targets, driven by strong performance of condominium sales and income-generating property sales.
• Balance sheet: Total assets of 113.076 billion yen, up 2.4 billion yen year-over-year; total interest-bearing debt of 65.496 billion yen, up 8.1 billion yen year-over-year; net assets of 34.721 billion yen, up 1.791 billion yen year-over-year; equity ratio of 30.7%.

Previous Mid-Term Management Plan (FY2024-FY2026) Review

• Three-year cumulative performance: Operating profit of 14.802 billion yen, net income of 8.384 billion yen, both significantly exceeding plan targets. Debt-to-equity ratio remained below the 2x target, while ROE reached 7.8% just shy of the 8% target.
• Key strategic progress: Expanded condominium operations to new areas including Sakai City (Osaka) and Kakogawa City (Hyogo), with the Kakogawa project selling out completely within 4 months of launch. Launched residential paid nursing home developments, began operations at the first grid-scale storage facility in Tamba-Sasayama (Hyogo) with two more under development, expecting annual revenue of several hundred million yen from this segment long-term. Established sustainability governance frameworks including materiality identification, and promoted joint development projects and industry partnerships to build capacity.
• Unfinished goals: Total unit sales volume across segments missed plan targets, and the planned shift to a more diversified profit structure was not achieved due to the outperformance of core condominium sales.

New Mid-Term Management Plan (FY2027-FY2029) Priorities

• Core focus: Strengthen investment in human capital, push forward profit structure transformation, continue expanding into new business areas. Set conservative numerical targets based on current market uncertainty while strengthening the management foundation for future growth.
• Segment-specific strategies: For condominiums, expand target operating areas, implement strategic land acquisition, build a stable supply pipeline, and improve customer relationship management. For detached homes, focus on strict land selection, establish in-house construction frameworks, and improve after-sales services. For rental and other real estate sales, pursue non-residential opportunities, scale up steel-frame income property development, and diversify exit strategies.
• KPIs: Maintain ROE target of 8% or higher, cap debt-to-equity ratio at 2x or lower to balance growth and stability.
• Dividend policy: Increased the FY2026 year-end dividend from 35 yen to 37 yen, bringing full-year dividend to 72 yen, in line with a 30% target payout ratio.

1. Condominium Sales Business: 34.1 billion yen in revenue (81% of total consolidated revenue), delivered 610 units (10 units above initial plan). Revenue increased 3.5 billion yen year-over-year due to higher average selling price per unit, even though delivered units fell. Gross profit margin remained above 20%, down 1.7 percentage points year-over-year, with overall profit increasing year-over-year.
2. Detached Home Sales Business: 1.763 billion yen in revenue (4.2% of total consolidated revenue), delivered 38 units. Gross profit margin was 1.1 percentage points lower year-over-year, but exceeded initial profitability assumptions for acquired land. Both revenue and profit missed initial plan targets due to lower-than-planned delivered units.
3. Other Real Estate Sales Business: 2.68 billion yen in revenue (6.4% of total consolidated revenue), delivered 15 projects of income-generating properties (mostly steel-frame and wooden apartments). Revenue and profit decreased significantly year-over-year due to the absence of large land parcel sales that occurred in the prior year, and lower average revenue from this year's property mix which included more low-unit-price wooden properties. Gross profit margin remained at a high level from profitable steel-frame apartment sales, and full-year profit exceeded initial plan despite revenue missing target due to higher-than-expected margins.
4. Real Estate Rental Business: Revenue increased year-over-year from new completed properties coming online, maintained a 97% high occupancy rate, and grew total owned units to over 2,100 units. Profit margin decreased year-over-year due to higher renovation and maintenance costs for existing properties, but delivered stable profit.

• FY2027 (February 2027 Term) Full Year Guidance: Expects total revenue of 46.0 billion yen (a new all-time high), operating profit of 4.3 billion yen, recurring profit of 3.0 billion yen, and net income of 2.1 billion yen, projecting higher revenue but lower profit than FY2026.
• Condominium sales guidance: Plans to deliver 585 units (down from 610 in FY2026), with an average price per unit of 59 million yen continuing the upward trend; total revenue is projected to increase by ~0.5 billion yen year-over-year, but profitability will be lower than recent periods due to rising construction costs. As of the end of February 2026, 72.6% of planned FY2027 delivered units are already under contract, with total contracted but undelivered units across future periods reaching 733 units valued at 44.7 billion yen.
• Segment-specific guidance: Detached home sales expects higher revenue from increased delivered units; other real estate sales projects revenue to nearly double year-over-year, driven by planned sales of whole rental apartment buildings and a completed residential paid nursing home adding ~2.0 billion yen in new revenue; real estate rental revenue expects to stay roughly flat year-over-year.
• New Mid-Term (FY2027-FY2029) Guidance: Plans for higher cumulative revenue but lower cumulative profit than the prior mid-term plan, reflecting the impact of continued construction cost increases on project profitability. The 2027 full-year annual dividend is projected at 60 yen, reflecting the expected full-year decline in profit.
• Maintains conservative planning while retaining flexibility: Land acquisition will be adjusted based on market conditions and profitability outlook, with a continued focus on acquiring small-to-mid-sized projects in high-demand areas.

• Geopolitical risk: Military conflict in the Middle East is spreading to energy and housing equipment sectors, increasing inflation pressure and creating downside risk for overall economic growth.
• Interest rate risk: Rising long-term interest rates driven by fiscal uncertainty and Bank of Japan policy shifts are increasing the company's funding costs, as total borrowings have grown to fund land acquisition and new business development.
• Construction cost risk: Ongoing increases in construction costs are putting downward pressure on project profitability across all development segments.
• Market uncertainty: Business sentiment has turned more cautious across corporate Japan, and overall economic outlook has become increasingly uncertain, which may impact housing demand.
• Execution risk: The planned transformation to a more diversified profit structure has been delayed in the prior mid-term period, and requires successful execution of new business initiatives in the new mid-term plan to achieve targets.

Only the question topics were provided in the transcript, full question and answer text was not included in the available source content. The key topics addressed in the Q&A session were: customer trends in the Kansai region; potential entry into paid nursing home operation; potential expansion of condominium development areas in the Kansai region; business segment optimization and profit structure transformation under the new mid-term management plan; and expected condominium gross profit margin over the mid-term plan period.