Shimizu Q1 Net Profit Quadruples to ¥55.3 Billion on ¥35.5 Billion Equity-Method Windfall; FY27 Guidance Raised

Shimizu Corporation (TSE: 1803), one of Japan's five largest general contractors, reported consolidated results for the first quarter of the year to March 2027, covering the three months to June 30, 2026, under Japanese GAAP. Net sales rose 9.3% to ¥482,829 million and operating profit 11.8% to ¥19,283 million. Below the operating line the picture changes completely: ordinary profit jumped 201.0% to ¥55,677 million and profit attributable to owners of the parent 396.5% to ¥55,257 million, taking quarterly earnings per share to ¥81.36 from ¥16.33. Comprehensive income rose 140.0% to ¥57,739 million.

A ¥35.5 billion negative-goodwill gain reshapes the quarter

Ordinary profit landed at almost three times operating profit for one reason. On June 30, 2026 — the final day of the quarter — Shimizu acquired additional shares in Seiwa Sogo Tatemono Co., Ltd., turning the property company into an equity-method affiliate. Shimizu's share of the acquired net assets exceeded what it paid, and that difference, a negative-goodwill equivalent of ¥35.5 billion, was recognised in a single quarter as equity-method investment income. The line swelled to ¥35,788 million from just ¥23 million a year earlier, lifting total non-operating income to ¥39,612 million from ¥4,324 million. Shimizu set the item out in a separate notice published the same day, and stresses that the gain is a non-cash consolidation-accounting entry that brings no money in.

Why net profit almost matched ordinary profit

Tax would normally take roughly a third of the distance between ordinary and net profit; here only ¥420 million separated the two. Two things did that. First, extraordinary income of ¥12,541 million — mostly an ¥11,768 million gain on the disposal of cross-shareholdings, against ¥985 million a year ago — pushed pre-tax profit up 231.4% to ¥68,219 million, with essentially no extraordinary losses to offset it. Second, income taxes came to only ¥12,985 million, an effective rate of 19.0% against 43.2% a year earlier, because negative goodwill recognised through the equity method carries no tax charge. A ¥24 million loss attributable to non-controlling interests then nudged the parent share slightly above the ¥55,233 million group figure.

Construction margins did the real work

Strip the windfall away and the operating result still improved. Completed-construction sales rose 12.2% to ¥438,896 million as large projects already on the books progressed, and the gross margin on completed construction work widened to 10.8% from 9.2%, lifting construction gross profit 31.4% to ¥47,430 million. The development business went the other way: sales fell 13.0% to ¥43,932 million and the gross margin dropped to 13.3% from 22.7%, roughly halving that gross profit to ¥5,830 million from ¥11,451 million. Selling, general and administrative expenses rose 12.2% to ¥33,977 million. At the parent-only level the completed-construction margin reached 10.3% against 8.1%, with building work at 10.4% (8.5%) and civil engineering at 10.2% (6.9%).

Segments: the core construction arm carried the quarter

Segment profit at the Shimizu construction business more than doubled to ¥15,547 million from ¥6,018 million, on external sales of ¥354,912 million. Every other segment shrank: the company's investment and development business earned ¥1,890 million against ¥5,574 million, road paving — carried out by subsidiary Nippon Road — ¥1,311 million against ¥1,689 million, and other businesses ¥2,241 million against ¥3,620 million. Consolidation adjustments swung to −¥1,708 million from ¥349 million positive, so reported operating profit of ¥19,283 million sits below the ¥20,991 million segment total.

Order intake halved against a bumper comparison

The soft spot is the order book. Parent-only construction orders fell 36.4% to ¥382,949 million, and total orders including development came to ¥404,751 million, down 35.0%. Domestic private-sector orders dropped 47.5% to ¥295,944 million against a year-earlier quarter that included an unusually large real-estate award — the real-estate sector alone booked ¥253.1 billion in the prior first quarter versus ¥42.2 billion this time. Domestic public-sector orders more than doubled to ¥70,069 million (+118.4%) and overseas orders tripled to ¥16,935 million (+203.7%). The backlog, which is what actually feeds future revenue, barely moved: ¥2,666,389 million at June 30, up 2.4% year on year and above the ¥2,636,969 million carried at the March year-end.

Guidance lifted by exactly the size of the gain

Shimizu revised the full-year forecast it issued on May 12. Ordinary profit guidance rises ¥35.5 billion to ¥183,500 million — up 50.0% year on year and 24.0% above the previous forecast — and net profit by the same ¥35.5 billion to ¥165,500 million, up 30.7% year on year and 27.3% above the earlier figure, for forecast EPS of ¥243.72. Net sales guidance of ¥2,310,000 million (+12.3%) and operating profit guidance of ¥153,000 million (+28.9%) are untouched: the entire revision is the accounting entry. Measured against those targets, the first quarter delivered 20.9% of full-year sales and 12.6% of full-year operating profit.

Dividend held, ¥10 billion buyback authorised

The dividend forecast is unchanged at ¥77.00 per share for FY3/2027 (¥38.50 interim and ¥38.50 final), up from the ¥72.00 paid for FY3/2026. Shimizu targets a consolidated payout ratio of about 40%, but because the negative-goodwill gain brings in no cash it was left out of that calculation. Separately, the board resolved on July 30 to repurchase up to 6 million shares, or up to ¥10.0 billion. Total assets edged up to ¥2,655,834 million as cash and deposits climbed to ¥348,847 million; liabilities fell ¥26.5 billion to ¥1,626,649 million and net assets rose ¥28.0 billion to ¥1,029,184 million, taking the equity ratio up 1.4 points to 38.2%. Consolidated interest-bearing debt stood at ¥573.2 billion, ¥5.8 billion higher than at the March year-end. No quarterly cash flow statement was prepared; depreciation for the quarter was ¥7,903 million.

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.