Overview of Operating Results, etc.

１．Overview of Operating Results for the Nine Months Ended December 31, 2024
Although the upward trend of capital investment continued driven by buoyant corporate earnings, the outlook of the Japanese economy remains uncertain because of persisting risks, including destabilizing international circumstances, exchange rate fluctuations, and increasing interest rates, among others, in addition to rising demand for labor and price increases.

Regarding the business environment in which the Group operates, whereas brisk capital investment in decarbonized power sources is expected in view of the growing need for investment in decarbonization, the volume of construction at conventional power stations, which has been the Company’s core business for many years, has been trending downward. Furthermore, because of the cost impact of prices of materials and equipment and soaring labor costs as well as chronic labor shortages, the business environment continues to be challenging. Nevertheless, the energy and infrastructure business in which the Group is engaged has begun to show some positive signs as electric power demand becomes increasingly likely to grow over the medium to long term with advancements in digital transformation (DX) and green transformation (GX).

In these circumstances, the Group has judged that it is important to pursue a business strategy of diversifying revenue streams by expanding our presence in the general industry and other market, as well as in the renewable energy-related market, in view of the fact that our business has been overly dependent on the electric power market, and we launched the FY2024 mid-term management plan (FY2024-FY2026) in April 2024, which focuses on strengthening human capital.
Specifically, in accordance with the basic policy of “creating a strong and flexible Q’d with people at the core,” we are addressing the following key issues: “strengthen human capital by investing in human resources,” “refine ‘Q’d’ so as to be chosen by customers,” and “strengthen ties with all people and organizations involved in our company.”

Especially, in order to strengthen sales capabilities and competitiveness, we reorganized our operations by function, including sales, construction cost estimating, and construction, and established new branches that serve as sales bases rooted in each region. By integrating previously dispersed information, knowledge, and skills, we have improved efficiency in securing orders from new customers and fields, generating a steady flow of successful results. In a bid to further expand the order flow, we are forging ahead with a variety of initiatives, such as early determination of specification through design support for customers, development of a construction cost estimation database incorporating the latest insights, enhanced procurement of materials and equipment by diversifying domestic and international procurement channels, and joint simulation of securing workers by sharing construction work information early with key partner businesses.

As a result, orders received were ¥60,437 million (up 46.4% year-on-year), owing mainly to the receiving of orders concerning air conditioning work and electrical work at public facilities, the installation of additional facilities for chemical plants, long-term service agreements for biomass power plants, maintenance and repair work for oil refineries, solar power facilities for on-site power purchase agreements (PPA), implementation of business continuity planning (BCP) measures, work for recovery from torrential rain, new projects for decarbonization of thermal power plants through synergy with the components manufacturing business of an overseas subsidiary, preparation for resumption of operation of nuclear power plants, etc.

Meanwhile, net sales were ¥46,462 million (down 27.0% year-on-year), because the implementation of safety measures at nuclear power plants and construction of thermal power plants have run their course and projects related to treated water at the Fukushima Daiichi Nuclear Power Plant were completed in the previous fiscal year, despite the progress of air conditioning work and electrical work at public facilities, solar power generation facilities for on-site PPA as well as installation of new and additional facilities for substations.

The amount carried forward to the next period was ¥111,651 million (up 12.1% year-on-year).

As for profits, operating loss was ¥12 million (compared to operating profit of ¥2,912 million for the same period of the previous fiscal year) due to a decrease in net sales and an increase in the cost ratio (an increase in subcontracting costs in line with labor shortages, etc.). On the other hand, the Company posted operating profit of ¥237 million for the third quarter of the fiscal year under review (from October 1, 2024 to December 31, 2024), due to a relatively small number of construction works with a high cost ratio and efforts to reduce expenses. Ordinary profit was ¥611 million (down 83.6% year-on-year) due mainly to the recording of foreign exchange gains in line with exchange rate fluctuations. Profit attributable to owners of parent amounted to ¥1,091 million (down 48.3% year-on-year), reflecting a gain on sale of investment securities. They were sold in order to improve asset efficiency.

Business results by segment were as follows.

(Facilities Construction)
Total orders received were ¥55,800 million (up 49.5% year-on-year) due to increases in the Energy Division and the Green Energy Business Division.
Net sales were ¥42,001 million (down 29.6% year-on-year) due to decreases in the Energy Division and the Nuclear Power Division.

(Other Businesses)
Total orders received were ¥4,618 million (up 16.8% year-on-year).
Net sales were ¥4,442 million (up 12.5% year-on-year).

２． Overview of Financial Position for the Nine Months Ended December 31, 2024
Total assets amounted to ¥102,770 million as of December 31, 2024, a decrease of ¥4,701 million from the end of the previous fiscal year. This was mainly due to a decrease in securities.
Total liabilities amounted to ¥35,936 million as of December 31, 2024, a decrease of ¥2,986 million from the end of the previous fiscal year. This was mainly due to a decrease in other in current liabilities.
Net assets amounted to ¥66,833 million as of December 31, 2024, a decrease of ¥1,715 million from the end of the previous fiscal year. This was mainly due to a decrease in valuation difference on available-for-sale securities.

３．Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information
The consolidated financial results forecast for the fiscal year ending March 31, 2025, announced on November 5, 2024, remains unchanged.