Sho-Bond FY2026 Full Year: Profit Grows for 14th Year Despite Revenue Slip

Sho-Bond’s full-year revenue declined 1.7% to ¥89.204 billion, as expressway company orders fell. Operating profit, however, rose 0.2% to ¥20.831 billion, and net profit increased 2.5% to ¥15.439 billion, achieving a 14th consecutive year of profit growth. The gross profit margin remained high at 29.9%, aided by growing sales of high-margin construction materials. Recurring profit grew 1.6% to ¥21.485 billion, and gains on sales of investment securities also boosted the bottom line. Orders received decreased 2.7% to ¥80.004 billion, but medium-to-long-term demand appears resilient, supported by the national land resilience plan.

The company’s business is split into Domestic Construction and Other (including overseas construction and product manufacturing). Domestic Construction accounted for 95.1% of revenue. External sales in this segment fell 2.2% to ¥84.847 billion, and segment profit came to ¥19.675 billion. Orders received decreased 3.3% to ¥75.647 billion, driven by weak expressway projects. The company focused on winning government-ordered work, and sales of construction materials like seismic reinforcement materials and coupling materials increased, helping maintain segment profit despite lower revenue. The order backlog at the end of the period stood at ¥72.498 billion, down 11.3% from the previous year-end.

The Other segment posted a 10.7% increase in external sales to ¥4.356 billion, with segment profit surging to ¥1.044 billion. Improved earnings from equity-method affiliates in Thailand and the U.S. contributed, with equity-method investment income swinging from a ¥69 million loss to a ¥167 million profit. This marks an early positive contribution from overseas operations.

Total assets at year-end rose ¥702 million to ¥129.858 billion. Cash and deposits decreased, but securities and investment securities increased, maintaining financial stability. The equity ratio climbed to 82.3% from 81.4%, reflecting a nearly debt-free balance sheet. Operating cash flow was strong at ¥19.33 billion, double the previous year, largely due to a decrease in trade receivables.

Leveraging this ample cash, the company pursued aggressive shareholder returns. It paid an interim dividend of ¥82 per share (before the stock split) and a year-end dividend of ¥25.25 (post-split), bringing the payout ratio to 60.1%. Additionally, it executed ¥5 billion in share buybacks, achieving its target of a 90% total return ratio. On August 10, 2026, it announced another ¥5 billion buyback program, signaling continued high shareholder returns for FY2027. The company conducted a 1-for-4 stock split effective January 1, 2026; the split-adjusted annual dividend amounts to ¥45.75 per share.

Key risks facing Sho-Bond include:

• Public investment reliance: Most revenue comes from government and expressway company orders, making performance sensitive to fiscal policy.
• Larger projects and competition: The market is expanding due to aging infrastructure, but new entrants and price competition could pressure margins.
• Declining order backlog: Orders received this period fell below revenue, causing the backlog to shrink 11.3%, necessitating stronger order wins to sustain future sales.
• Overseas profitability: The Other segment is growing but still small; success of overseas M&A and alliances is critical for growth.
• Natural disasters and climate change: While they create repair demand, large-scale disasters could cause construction delays and cost overruns.

For FY2027 (ending June 2027), Sho-Bond forecasts modest growth: revenue ¥90.0 billion (up 0.9%), operating profit ¥21.0 billion (up 0.8%), recurring profit ¥21.6 billion (up 0.5%), and net profit ¥15.5 billion (up 0.4%). The government’s first medium-term land resilience plan, with an estimated ¥20 trillion-plus in projects over five years from FY2026, is expected to underpin demand. While the order environment appears solid over the medium term, the reduced opening backlog may result in a year-on-year decline in the first half.

Sho-Bond significantly enhanced shareholder returns under its Medium-Term Management Plan 2027, targeting a total return ratio of 90%. It combined dividends and buybacks aggressively this fiscal year. After the 1-for-4 stock split, it plans an annual dividend of ¥46.50 per share (post-split) and announced a further ¥5 billion buyback. In a construction sector where PBRs often languish below 1x, Sho-Bond’s ROE of 14.6% and equity ratio of 82.3%, along with its shareholder return policy, are likely to attract investor favor.