Kajima Q1 FY2027: operating profit up 7.8%, orders up 21%

Kajima reported revenue of ¥640.0 billion for Q1 FY2027 (April-June 2026), down 1.5% year on year, as completed construction work declined both domestically and overseas. Operating profit rose 7.8% to ¥40.5 billion, and net income attributable to owners of the parent increased 16.6% to ¥30.9 billion. Gross profit climbed 12.7% to ¥85.3 billion, and ordinary profit was up 14.4% to ¥44.4 billion. The operating margin improved to 6.3% from 5.8%, helped by stronger civil engineering profitability, where the gross margin reached 21.4% against a full-year forecast of 20.4%.

Construction orders rose 21.1% to ¥630.2 billion. Domestic orders increased 38.6% to ¥486.3 billion, led by a sharp rise in building construction work from both public and private clients. Overseas orders fell 15.3% to ¥143.8 billion. On a non-consolidated basis, orders including development work grew 34.7% to ¥468.9 billion. The order backlog stood at ¥3,241.3 billion, up 28.1% from the prior fiscal year-end. Full-year forecasts were left unchanged.

Kajima reports five segments: civil engineering, building construction, real estate development and other, domestic subsidiaries, and overseas subsidiaries. Figures include internal transactions.

Civil engineering revenue rose 13.3% to ¥106.2 billion, and operating profit surged 56.8% to ¥15.2 billion. With an operating margin of 14.3%, it was the most profitable segment, lifted by progress on multiple large projects at peak stages.

Building construction revenue declined 15.2% to ¥226.1 billion, and operating profit fell 24.0% to ¥12.3 billion, as many projects were in early construction phases. The gross margin improved to 11.3% year on year, but lower revenue dragged down profit.

Real estate development and other revenue increased 23.1% to ¥11.3 billion, while operating profit dropped 39.5% to ¥0.4 billion, reflecting lower gross profit from property development. Kajima expects several sales in the second half, including US logistics warehouses, keeping full-year targets within reach.

Domestic subsidiaries revenue grew 7.7% to ¥86.9 billion, but operating profit decreased 20.2% to ¥4.2 billion as SG&A expenses and wage hikes pressured earnings.

Overseas subsidiaries revenue rose 5.1% to ¥240.5 billion, and operating profit jumped 48.7% to ¥8.1 billion. Construction revenue was lower in Oceania and Asia, but an increase in US development property sales lifted the segment. Of the 10-15 overseas development sales planned for this fiscal year, three were completed in Q1, and US warehouse development is a key upside factor.

Total assets at the end of Q1 stood at ¥3,384.4 billion, down ¥239.8 billion from the prior fiscal year-end. Notes and accounts receivable from completed construction work fell by ¥293.1 billion, while cash and deposits increased ¥88.8 billion. Total liabilities decreased ¥190.8 billion to ¥1,997.2 billion. Interest-bearing debt was reduced to ¥817.7 billion from ¥833.1 billion. The equity ratio improved to 40.4% from 39.0%.

Kajima plans an annual dividend of ¥146.00 per share (interim ¥73.00, year-end ¥73.00), unchanged from the prior year. The company also repurchased 5,639,500 treasury shares under a board resolution dated May 14, 2026, and delivered shares to directors and employees through a trust, lifting the treasury stock balance to ¥146,173 million. The balance sheet remains solid, with the equity ratio back above 40%.

Kajima cited the following main risks and challenges in its quarterly financial statement:

• Inflationary pressure and rising policy rates amid unstable international conditions
• Tight labor supply in the Japanese construction market, plus higher prices and shipment restrictions for oil-derived products
• Uncertainty over construction material supply and price trends
• Geopolitical risk, resurgent inflation, and higher interest rates affecting overseas real estate markets
• Intensifying competition for construction orders, making it harder to secure adequate margins

In particular, overseas development remains strong, centered on US logistics warehouses, but a rising-rate environment could pressure sale prices and investment yields, a downside risk for earnings. In domestic construction, the key to maintaining margins is whether Kajima can pass rising labor costs through to contract prices.