Obayashi FY26 Operating Profit Jumps 37% to ¥194.7 Billion; Net Profit Up 20% on Construction Margin Recovery

Obayashi Corporation (TSE: 1802), one of Japan's "Big Five" general contractors, reported consolidated full-year results for the fiscal year ended March 31, 2026 (FY3/2026) under Japanese GAAP. Revenue was essentially flat at ¥2,586,258 million (-0.2%), but operating profit jumped 36.6% to ¥194,678 million from ¥142,469 million as construction margins recovered. Ordinary profit rose 34.1% to ¥204,195 million, and net profit attributable to owners of the parent climbed 19.5% to ¥173,759 million from ¥145,355 million. Basic EPS rose to ¥249.42 from ¥202.91, the operating margin reached 7.5%, and ROE improved to 14.4% from 12.6%.

Margins recover even as revenue stays flat

The story of the year was profitability, not top-line growth. Revenue was virtually unchanged from the prior year's ¥2,590,765 million, yet operating profit surged more than a third. The recovery in construction margins — after a period when Japanese contractors absorbed sharply higher materials and labour costs on fixed-price legacy contracts — flowed straight through to the bottom line. Comprehensive income, boosted by valuation and exchange-related items, more than doubled to ¥222,645 million (+131.9%).

Profit growth outpaces the top line

With revenue flat, the 36.6% jump in operating profit and the 34.1% rise in ordinary profit reflect a structural improvement in project economics rather than volume. Net profit attributable to owners rose a more measured 19.5% — slower than operating profit because the prior year had carried a relatively favourable tax and non-operating position — but still lifted basic EPS by 22.9% to ¥249.42, helped by a lower share count. The combination pushed ROE to 14.4%, a level that comfortably exceeds the cost of equity typically assumed for Japanese contractors.

Balance sheet and cash flow

Total assets stood at ¥3,143,449 million and net assets at ¥1,316,466 million, giving an equity ratio of 40.0%. Owners' equity was ¥1,258,424 million and book value per share reached ¥1,830.64. Operating cash flow was a robust ¥252,920 million, comfortably exceeding reported net profit, and period-end cash and equivalents stood at ¥416,028 million — a solid liquidity cushion for a capital-intensive contractor.

Dividend raised to ¥88; share count cut

Reflecting the stronger year, Obayashi raised its annual dividend to ¥88.00 per share (¥41 interim + ¥47 year-end) from ¥81.00, for a payout ratio of 35.3%. The company also cut its share count to 691.8 million shares from 721.5 million, reflecting buybacks and cancellation — a clear signal of capital-return discipline alongside the dividend increase. For FY3/2027, management has already guided a further dividend rise to ¥94.00 (¥47 interim + ¥47 year-end).

FY27 guidance: higher revenue, lower profit

Despite the strong year, management's FY3/2027 outlook is cautious on profitability. Revenue is guided up 13.9% to ¥2,945,000 million, but operating profit is seen falling 7.5% to ¥180,000 million, ordinary profit down 10.4% to ¥183,000 million, and net profit attributable to owners down 9.6% to ¥157,000 million, with EPS of ¥228.39. The guidance implies that the exceptional margin recovery booked in FY3/2026 normalises somewhat even as the company executes a larger order book — a reminder that contractor margins remain sensitive to project mix and input costs.

JapanStockPulse provides informational content only and does not constitute investment advice. Figures are taken from the company's published earnings short report and may be subject to subsequent revision.