Kandenko Q1 FY2027: Operating profit rises 13% despite 4.5% revenue decline

Revenue for the first quarter of fiscal year ending March 2027 was ¥158.04 billion (down 4.5% year on year). Operating profit rose 12.8% to ¥19.72 billion, ordinary profit increased 12.5% to ¥20.54 billion, and net income attributable to parent company shareholders climbed 4.2% to ¥13.19 billion.

The revenue decline was mainly due to timing shifts in large project completions, but an improvement in the cost ratio lifted the gross profit margin on completed construction from 15.2% a year earlier to 18.1%, driving profit growth. SG&A expenses edged higher, but margin expansion more than offset it.

New orders were strong at ¥246.25 billion (up 11.2%), setting the stage for revenue recovery. The full-year forecast was maintained: revenue ¥780 billion (+5.1% vs. prior year), operating profit ¥90 billion (+8.3%), and net income ¥65 billion (+2.3%).

Kandenko's business is dominated by the Equipment Construction segment, with other activities including electrical equipment sales and real estate.

Equipment Construction generated external revenue of ¥155.83 billion (down 4.5% year on year), but segment profit rose 11.9% to ¥18.95 billion. Profitability improved markedly, with segment margin expanding to 12.2% from 10.4% a year ago, reflecting better project execution and gross margins on large contracts.

The Others segment saw external revenue fall 9.5% to ¥2.21 billion, yet segment profit grew 18.2% to ¥731 million, supported by stable income from real estate leasing.

Total assets at end-Q1 were ¥597.71 billion, down ¥37.91 billion from the prior fiscal year-end. Within current assets, notes and accounts receivable - trade and completed construction contracts decreased ¥63.56 billion, while securities rose ¥15.94 billion. Total liabilities were ¥196.61 billion, mainly reflecting a ¥34.16 billion decline in notes and accounts payable - trade and construction contracts payable. The equity ratio climbed 3.1 percentage points to 64.5%, further enhancing financial soundness.

Cash and deposits stood at ¥81.30 billion, up from year-end, indicating ample liquidity (a quarterly cash flow statement is not prepared).

For shareholder returns, the company forecasts an annual dividend of ¥130 per share (interim ¥65, year-end ¥65), a ¥6 increase from the prior year's ¥124. A steady dividend increase underscores a clear shareholder return stance. No share buyback was announced.

Kandenko notes that its forecasts are based on currently available information and assumptions subject to various uncertainties. Specific risks include:

• Trends in public works and private capital expenditure: economic fluctuations or reduced customer investment appetite may affect orders and progress.
• Rising material prices and labor costs: ongoing industry-wide cost inflation could pressure margins.
• Securing engineers and skilled workers: labor shortages remain a critical challenge for project execution.
• Construction loss provisions: although provisions decreased year on year, the balance of ¥6.71 billion warrants attention against potential future losses.

The company aims to maintain and enhance profitability by expanding new orders and enforcing rigorous cost control.

The FY2027 consolidated forecasts, unchanged from the April 28, 2026 release, project revenue of ¥780 billion (+5.1% year on year), operating profit of ¥90 billion (+8.3%), and net income of ¥65 billion (+2.3%). First-quarter progress rates of 20.3% for revenue and 21.9% for operating profit suggest a smooth start in line with initial assumptions.

Given the typical seasonality of large project completions concentrated in the second half, achieving the full-year targets appears well within reach.