Ohmori Grows FY7/2026 Revenue 25% but Operating Profit Only 2% as Margins Narrow; Guides Sales 9.9% Lower

Revenue grew by a quarter; gross profit grew 4.5%

Ohmori Co., Ltd. (TSE: 1844), the civil-engineering contractor whose two largest customers are the Tokyo Metropolitan Government's Bureau of Sewerage and Bureau of Waterworks, published consolidated results for the fiscal year from August 1, 2025 to July 31, 2026 on September 11, 2026 under Japanese GAAP. Revenue rose 25.3% to ¥8,075 million and operating profit 2.0% to ¥801 million, ordinary profit fell 0.4% to ¥756 million, and profit attributable to owners of the parent rose 30.4% to ¥676 million, for earnings of ¥36.15 per share against ¥27.80. The filing names the Tokyo Stock Exchange as its listing venue. Comprehensive income was identical to net profit in both years.

The gap between the first two lines is a cost story. Cost of sales rose 30.8% to ¥6,663 million, five and a half points faster than revenue, so gross profit rose only 4.5% to ¥1,411 million and the gross margin fell from 21.0% to 17.5%. Selling, general and administrative expenses grew 7.9% to ¥610 million — among them a provision for directors' retirement benefits of ¥18 million against ¥2 million, while directors' remuneration fell to ¥117 million from ¥130 million — leaving the operating margin at 9.9% against 12.2%. On about ¥1,631 million of additional revenue, the company added ¥16 million of operating profit.

Below operating profit: more interest, a share-sale gain and a much smaller tax bill

Non-operating expenses almost doubled, to ¥61 million from ¥31 million, chiefly because interest expense rose 63.3% to ¥55 million; non-operating income of ¥16 million, including ¥5 million of insurance proceeds, did not cover it, so ordinary profit slipped 0.4% to ¥756 million. Extraordinary gains of ¥29 million — ¥27 million on the sale of shares in affiliated companies and ¥2 million on the sale of fixed assets, against none a year earlier — lifted pre-tax profit 3.5% to ¥785 million. The decisive line is tax: income taxes fell 54.5% to ¥109 million from ¥241 million, equal to 14.0% of pre-tax profit against 31.7%, with current taxes of ¥131 million against ¥264 million. That is why net profit rose 30.4% while ordinary profit fell. The filing does not explain the lower tax charge.

OLY carried the profit growth while the other three segments earned less

The four reporting segments split sharply. Construction, the civil-engineering contracting business, grew revenue 22.4% to ¥5,891 million, but segment profit fell 15.9% to ¥423 million; its gross profit fell 7.1% to ¥854 million, a gross margin of 14.5% against 19.1%. Orders received in the segment fell 17.2% to ¥4,897 million, below the year's construction revenue. Real Estate — property sales and leasing, sales of solar power equipment and a closet-rental business — grew revenue 64.3% to ¥986 million, but segment profit fell 4.7% to ¥111 million as its gross margin dropped from 29.7% to 19.8%. Telecommunications, maintenance and management work on telecom lines and facilities, grew revenue 7.7% to ¥483 million while profit fell 21.3% to ¥59 million.

OLY — lease sales of equipment for the company's OLY construction method, plus steel-frame fabrication — was the exception: revenue rose 24.7% to ¥740 million and segment profit 131.2% to ¥207 million, with gross profit up 78.9% to ¥228 million. OLY's profit gain of ¥117 million was larger than the group's whole ¥16 million operating-profit gain; the other three segments lost a combined ¥101 million, and OLY's share of segment profit rose to 25.9% from 11.4%. The company says it pushed OLY sales into central and western Japan from its Nagoya office, exhibited at sewerage trade shows and proposed the method for public-sector designs, and that cumulative projects using OLY passed 5,000. Segment revenues include ¥27 million of intersegment sales, all in OLY, which is why they add to ¥8,102 million against group revenue of ¥8,075 million.

The customer base is concentrated. The Tokyo Metropolitan Government's Bureau of Sewerage accounted for ¥3,668 million of revenue against ¥2,661 million, and its Bureau of Waterworks ¥1,020 million against ¥895 million — together 58.1% of group revenue, all in construction. The filing describes steady public investment in disaster prevention and national resilience and continued ordering of renewal and heavy-rain countermeasure works on Tokyo's water and sewer systems, set against rising construction material prices and labour costs and a chronic shortage of construction workers. It does not attribute the construction segment's lower margin to any specific cause.

Inventory ran down, cash came in and borrowings were repaid

Operating cash flow swung to an inflow of ¥1,011 million from an outflow of ¥871 million. Pre-tax profit of ¥785 million was supplemented by a ¥533 million decrease in inventories and a ¥220 million increase in trade payables, against a ¥300 million increase in receivables and ¥320 million of income taxes paid; a year earlier inventories had risen by ¥1,175 million. Real estate for sale fell to ¥5,454 million from ¥5,763 million — still 45.1% of total assets — and costs on uncompleted construction to ¥156 million from ¥369 million. Investing activities used ¥144 million, including ¥84 million of capital expenditure and a ¥24 million outflow on the sale of subsidiary shares that changed the scope of consolidation. Financing used ¥708 million, chiefly ¥550 million of long-term loan repayments and ¥207 million of dividends, and cash and cash equivalents ended at ¥2,569 million, up ¥158 million.

Total assets were almost unchanged at ¥12,084 million against ¥12,037 million, but liabilities fell ¥414 million to ¥5,673 million as long-term borrowings dropped to ¥3,379 million from ¥4,018 million, partly offset by short-term borrowings of ¥380 million against ¥291 million. Net assets rose 7.8% to ¥6,410 million and the equity ratio climbed from 48.8% to 52.5%. The company puts interest-bearing debt at 3.7 years of operating cash flow and interest coverage at 18.2 times. Ohmori sold all of its shares in Minato Civil Co., Ltd. on July 31, 2026 and removed it from consolidation; that company's results up to that date remain in the accounts.

Guidance: revenue down 9.9%, net profit down 25.1%, and the filing says why

For FY7/2027 Ohmori guides revenue of ¥7,274 million (−9.9%), operating profit of ¥742 million (−7.3%), ordinary profit of ¥700 million (−7.4%) and profit attributable to owners of ¥506 million (−25.1%), or ¥27.07 per share. The first half is guided weaker still, at revenue of ¥3,142 million (−12.8%) and operating profit of ¥337 million (−31.8%). The company gives two reasons for lower construction revenue: FY7/2026 was lifted by a large addition to revenue from contract increases after design changes on projects completed in the year, while newly won projects will need time for preparatory work such as surveys; and the July 2026 transfer of the Minato Civil shares takes that company out of the group. Ohmori says it will work to start new projects early, strengthen its construction capacity and pursue M&A to bring in companies with stable order bases, strong technology and construction track records.

Net profit guidance falls further than ordinary profit: ¥506 million is 72.3% of guided ordinary profit, against 89.3% in FY7/2026, a year that included ¥29 million of extraordinary gains and a tax charge of 14.0% of pre-tax profit; the filing does not break the guidance down below the four headline lines. The year-end dividend was raised to ¥12.00 from a planned ¥11.50 in a separate notice released the same day, against ¥11.50 for FY7/2025, for a total payout of ¥224 million and a payout ratio of 33.2% against 41.4%. Payment is scheduled to start on October 29, 2026. The company forecasts an unchanged ¥12.00 for FY7/2027, which it puts at a payout ratio of 44.3%.

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.