Overview of Operating Results, etc.

１．Overview of Operating Results for the Fiscal Year under Review
①Operating Results for the Fiscal Year under Review
The Japanese economy has maintained a gradual recovery trend and, with improved business sentiment, stock prices remain strong, and business confidence shows signs of rebounding. On the other hand, the outlook for the Japanese economy remains increasingly uncertain due to factors such as the impact of exchange rate fluctuations, increasing interest rates, labor shortages caused by rising demand for labor, as well as the emergence of risks related to soaring energy prices and supply constraints resulting from heightened tensions in the Middle East.
The business environment in which the Group operates has generally remained firm, despite the need to pay attention to issues such as soaring materials prices, longer procurement periods, and chronic labor shortages. This has been driven by capital investments in decarbonized related markets and toward the resumption of nuclear power plant operations, as well as capital investments to meet growing electricity demand particularly from new data centers resulting from expanded use of generative AI.
In these circumstances, the Group drew up the FY2024 mid-term management plan (FY2024-FY2026) two years ago. Based on the basic policy of “creating a strong and flexible Q’d with people at the core,” we addressed key issues and worked to expand the order flow and generate profits by optimizing our business portfolio based on accurate market analysis and fostering a virtuous investment cycle with people at the core.
Especially, in the nuclear power market, where the implementation of safety measures has progressed toward the resumption of operations at nuclear power plants across Japan, in the general industry market, where capital investment aimed at decarbonization and energy conservation is strong; and in the renewable energy-related market, where commercialization is advancing through the use of long-term decarbonized power source auctions and power purchase agreements (PPA), we steadily increased orders, and the amount of projects carried forward to the next period reached a record high.

As a result, total orders received were ¥106,593 million (up 16.5% year-on-year), owing mainly to the receiving of orders concerning implementation of safety measures at nuclear facilities, projects related to electric furnaces at steel plants toward decarbonization, reconstruction of aging waste incineration plants nationwide, electrical facility work at public utilities, replacement work of public hydroelectric power plants, operation and maintenance (O&M) and long-term service agreement (LTSA) services for biomass power plants, and solar power facility and construction work for on-site power purchase agreements (PPA).
Net sales were ¥83,083 million (up 22.7% year-on-year), owing mainly to progress of tasks related to the decommissioning of the Fukushima Daiichi Nuclear Power Plant, safety measures and maintenance and repair work implemented at nuclear power plants and other facilities across Japan, installation of new and additional facilities for substations in response to growing electricity demand, construction of storage battery-related plants, maintenance and repair work as well as removal work for thermal power plants, increased maintenance and repair work resulting from permanent staffing at oil refineries, and solar power facility and construction work for on-site PPA, among others.
The amount of projects carried forward to the next period was ¥144,931 million (up 19.4% year-on-year).
As for profits, operating profit was ¥4,737 million (up 77.8% year-on-year), as a result of the steady implementation of our continued initiative of selective order taking that emphasizes profitability—an effort we have been working on from the previous period—as well as improved profit margins due mainly to efforts to improve productivity, in addition to an increase in net sales. Ordinary profit was ¥5,518 million (up 65.1% year-on-year) due in part to the recording of gain on valuation of derivatives resulting from exchange rate fluctuations. Profit attributable to owners of parent amounted to ¥4,287 million (up 47.9% year-on-year), due to the recording of extraordinary income from the sale of cross-shareholdings and real estate for rent aimed at improving asset efficiency.


Business results by segment were as follows.

(Facilities Construction)
Total orders received were ¥101,114 million (up 18.3% year-on-year) due to increases in the Green Energy Business Division and the Nuclear Power Division.
Net sales were ¥77,297 million (up 25.3% year-on-year) due to increases in the Green Energy Business Division, the Energy Division, and the Nuclear Power Division.
Segment profit was ¥10,688 million (up 155.7% year-on-year).

(Other Businesses)
Total orders received were ¥5,802 million (down 4.3% year-on-year).
Net sales were ¥6,110 million (down 0.0% year-on-year).
Segment profit was ¥70 million (down 38.2% year-on-year).

②Future Prospects
The Group expects the outlook for the Japanese economy to remain uncertain, due to the need to closely monitor risks such as labor shortages caused by rising labor demand, increasing prices, exchange rate fluctuations, and increasing interest rates, as well as the impact of the situation in the Middle East.
In light of these factors, the Group will pursue initiatives such as strengthening information gathering (international intelligence), preparing for multiple scenarios, and diversifying procurement methods for equipment and materials. Additionally, we will strengthen information security and promote resilience measures to address cyber risks, such as supply chain attacks targeting companies, which have become increasingly serious in recent years.
Meanwhile, regarding the business environment in which the Group operates, capital investment is ramping up in earnest, especially in decarbonized related markets and toward the resumption of nuclear power plant operations, as well as in power supply infrastructure against the backdrop of growing electricity demand, particularly from new data centers resulting from expanded use of generative AI. The favorable environment for receiving orders is expected to continue.
In these circumstances, the Group is addressing the 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” under the FY2024 mid-term management plan (FY2024-FY2026), to ensure a sustainable virtuous investment cycle with people at the core. In FY2026, the final year of the plan, we will concentrate on addressing challenges, particularly the early development of employees to improve our technological capabilities and securing mobilization capacity, including that of our partner businesses, with the goal of achieving an ROE of 8.0% by FY2027. The Group will also strive to expand the order flow through proposals for high value-added technological solutions and order taking that leverages synergies with group companies, while seeking to generate further profits through productivity improvements.
Our forecast of consolidated financial results for the next fiscal year is as follows:

Consolidated Earnings
Net sales ¥95,000 million
Operating profit ¥7,300 million
Ordinary profit ¥7,500 million
Profit attributable to owners of parent ¥5,200 million


２．Overview of Financial Position for the Fiscal Year under Review
① Assets, liabilities, and net assets
The financial position of the Group fluctuates mainly due to notes and accounts receivable, inventories, notes and accounts payable, and advances received on construction contracts in progress. Regarding fixed assets, the Group owns land and buildings for business sites, company housing and dormitories for single employees, etc. Other assets include biomass power generation facilities, solar power generation facilities, and construction machinery and equipment.

a. Assets
Total assets amounted to ¥119,329 million at the end of the fiscal year under review, an increase of ¥11,247 million from the end of the previous fiscal year. This was mainly due to an increase in notes receivable, accounts receivable from completed construction contracts and contract assets.

b. Liabilities
Total liabilities amounted to ¥46,877 million at the end of the fiscal year under review, an increase of ¥7,222 million from the end of the previous fiscal year. This was mainly due to an increase in bonds payable.

c. Net assets
Net assets amounted to ¥72,452 million at the end of the fiscal year under review, an increase of ¥4,024 million from the end of the previous fiscal year. This was mainly due to an increase in valuation difference on available-for-sale securities.

② Cash flows
Cash and cash equivalents at the end of the fiscal year under review amounted to ¥9,687 million, an increase of ¥2,039 million from the end of the previous fiscal year.
The status of cash flows from operating, investing and financing activities and major contributing factors were as follows.

(Cash Flows from Operating Activities)
Net cash provided by operating activities amounted to \4,706 million (net cash used in operating activities amounting to \15,229 million in the previous fiscal year). This was mainly due to an increase in profit before income taxes and accrued consumption taxes.

(Cash Flows from Investing Activities)
Net cash provided by investing activities amounted to ¥931 million (net cash used in investing activities amounting to ¥90 million in the previous fiscal year). This was mainly due to sale and redemption of investment securities.

(Cash Flows from Financing Activities)
Net cash used in financing activities amounted to ¥3,671 million (net cash provided by financing activities amounting to ¥10,655 million in the previous fiscal year). This was mainly due to repayments of short-term borrowings.


３．Basic Policy on Profit Distribution and Dividends for the Current and Next Fiscal Years
The Company’s policy on profit distribution is to maintain stable dividends from a medium- to long-term perspective, and to aim for a gradual increase in dividend payments in line with profit growth, taking into consideration such factors as financial performance, internal reserve, and preparation for future business development. The Company intends to utilize internal reserve for implementation of various measures, such as capital investment and business investment, to strengthen the management foundation and for future business expansion.
Based on the above policy and from the viewpoint of emphasizing the return of profits to shareholders, the Company plans to pay a year-end dividend of ¥35 per share for the fiscal year under review, resulting in annual dividends of ¥63 per share, including an interim dividend of ¥28 per share.
For the next fiscal year (fiscal year ending March 31, 2027), the Company plans to pay dividends of ¥77 per share (an interim dividend of ¥38 and a year-end dividend of ¥39).