NITTOH Q1 Operating Profit Falls 35% as Construction Works Profit All but Disappears

One segment accounts for the decline

NITTOH Co., Ltd. (NSE: 1738), a group whose reporting segments are construction works, housing and related services, and building maintenance, published consolidated first-quarter results for FY3/2027 — the three months from April 1 to June 30, 2026 — under Japanese GAAP on August 7, 2026. Revenue fell 3.7% to ¥2,544 million, operating profit 35.0% to ¥33 million, ordinary profit 35.0% to ¥35 million and profit attributable to owners of the parent 25.1% to ¥20 million, or ¥4.96 per share against ¥6.63. The filing names the Nagoya Stock Exchange as its only listing venue.

Construction Works, the largest business, saw revenue fall 8.8% to ¥1,628 million from ¥1,785 million, and its segment profit collapsed to ¥2 million from ¥57 million, a decline of 95.2%. The filing gives the reasons: fewer construction jobs for newly built detached houses, together with persistently high building-material prices, delivery delays and staff shortages, which pushed back the start and completion of some projects and weighed on earnings. Describing the wider housing-construction industry, it notes that new housing starts remained weak, that material, logistics, energy and labour costs stayed high, and that rising home-acquisition costs and concern about interest rates kept individual buyers cautious.

The other two segments grew, from a smaller base

Housing and Related Services raised revenue 11.1% to ¥418 million from ¥376 million and segment profit 67.1% to ¥74 million from ¥44 million. Building Maintenance revenue rose 3.2% to ¥497 million from ¥481 million, and segment profit 30.7% to ¥40 million from ¥31 million. The filing says only that both businesses performed steadily and gives no further explanation.

In yen terms the bridge is short. Construction Works profit fell by about ¥54 million; the other two segments added about ¥40 million between them; and the adjustment for intersegment eliminations and corporate costs not allocated to segments widened by about ¥3 million to −¥84 million, as unallocated corporate expense rose to ¥92 million from ¥88 million. Together those make up the ¥18 million fall in operating profit. The segment revenues include intersegment sales, which came to less than ¥1 million this quarter.

Gross margin held; SG&A did not shrink

At group level the gross margin actually edged up. Cost of sales fell 4.4% to ¥1,862 million, slightly faster than revenue, so gross profit slipped only 2.0% to ¥681 million and the gross margin widened to 26.80% from 26.33%. Selling, general and administrative expenses, however, rose 0.6% to ¥648 million, and on gross profit of under ¥700 million that left very little: the operating margin narrowed to 1.32% from 1.96%. Of the ¥18 million fall in operating profit, ¥14 million is lower gross profit and ¥4 million higher SG&A.

A presentation change restates last year's figures

From this quarter NITTOH reports rental income from its own properties as revenue and the matching costs as cost of sales, instead of as non-operating income and expenses, on the grounds that leasing its property is a continuing earnings activity. The prior-year quarter has been restated on the same basis: ¥5.1 million of rental income and ¥0.2 million of other income were moved into revenue, and ¥2.4 million of rental costs into cost of sales. The rental business is reported within the Construction Works segment, and the year-on-year comparisons for revenue and operating profit here use the restated figures, as the filing does. Lease revenue within Construction Works was ¥15 million, against ¥10 million a year earlier.

Below the operating line

Non-operating income fell to ¥4.0 million from ¥4.5 million, chiefly because insurance proceeds dropped to ¥67 thousand from ¥1,047 thousand, while dividend income rose to ¥2.1 million from ¥1.6 million. Non-operating expenses rose to ¥2.5 million from ¥2.2 million as interest expense increased to ¥2.4 million from ¥2.1 million. Ordinary profit therefore fell by the same 35.0% as operating profit, to ¥35 million, and with no extraordinary items pre-tax profit was the same ¥35 million.

Income taxes fell to ¥15 million from ¥27 million, a burden of 42.8% of pre-tax profit against 50.4% a year earlier, which is why net profit fell less steeply than operating profit, by 25.1%. Comprehensive income was ¥23 million, down 4.3%, supported by a ¥3.5 million valuation gain on available-for-sale securities against a ¥2.2 million loss a year earlier.

A smaller balance sheet and a slightly higher equity ratio

Total assets fell ¥122 million from the March year-end to ¥7,499 million. Notes and accounts receivable, including contract assets, declined ¥63 million and cash and deposits ¥42 million to ¥1,797 million, while inventories rose ¥7 million. Liabilities fell ¥73 million to ¥2,622 million, chiefly because the provision for bonuses dropped ¥72 million to ¥83 million and income taxes payable fell ¥48 million, partly offset by a ¥97 million rise in other current liabilities. Short-term borrowings, the current portion of long-term loans and long-term loans together came to ¥680 million, against ¥705 million at the year-end.

Net assets fell ¥49 million to ¥4,877 million. Retained earnings declined ¥52 million, which is consistent with quarterly profit of ¥20 million less the ¥18.00-per-share year-end dividend for FY3/2026 on 4,053,103 shares outstanding. The equity ratio rose to 65.0% from 64.6%. NITTOH did not prepare a quarterly cash-flow statement; depreciation and amortisation came to ¥18 million, against ¥16 million.

Guidance unchanged, with the quarter described as broadly on plan

NITTOH kept the forecasts it published on May 8, 2026, saying results for the quarter had tracked broadly in line with plan. For the first half it expects revenue of ¥5,630 million, up 5.1%, operating profit of ¥160 million, down 11.1%, ordinary profit of ¥170 million, down 8.3%, and net profit of ¥100 million, down 14.6%. For the full year FY3/2027 it forecasts revenue of ¥11,500 million, up 3.2%, operating profit of ¥420 million, down 10.2%, ordinary profit of ¥440 million, down 4.5%, and net profit attributable to owners of the parent of ¥310 million, down 6.1%, or ¥76.48 per share.

The first quarter delivered 45.2% of the first-half revenue forecast but only 21.0% of its operating-profit forecast, so reaching ¥160 million for the half would require about ¥126 million of operating profit in the second quarter alone. Against the full-year plan the quarter represents 22.1% of revenue and 8.0% of operating profit. The dividend forecast is also unchanged: no interim dividend and a year-end dividend of ¥18.00 per share, the same as for FY3/2026.

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.