SONEC CORPORATION

Business Details

The core business handled by Sonec Corporation and its subsidiary SUKOYAKA Co., Ltd. The building construction division undertakes new construction and renovation/extension work for a wide range of private-sector clients including companies, factories, hospitals, welfare facilities, and individual residences. The civil engineering division is comprised mostly of public works, with rivers, roads, sewerage, and land development being the main work types. A distinguishing feature is the broad network of contacts with government agencies, including Hyogo Prefecture and municipalities within it. As a side business, the segment also engages in real estate sales and leasing. This is the core segment, accounting for approximately 98% of consolidated group net sales.

Recent Overview

For FY2027 (ending March 2027), net sales of ¥20,650 million and segment profit of ¥1,080 million are forecast, representing a plan for both lower sales and lower profit year on year.

Following a corrective disclosure dated May 12, 2026, the outlook for the construction business for FY2027 (ending March 2027) was revised. The official forecast now stands at net sales of ¥20,650 million (down 8.2% year on year) and segment profit (operating income) of ¥1,080 million (down 41.9% year on year). Prior to the correction, the figures had been stated as an 8.1% year-on-year decrease in net sales and a 69.4% year-on-year increase in segment profit, making this a material correction in which the direction of the profit change was reversed. While sales volume is expected to be maintained on the back of the accumulated backlog carried forward of ¥19,487 million, a decline in profit margin is expected due to rising construction costs and other factors.

Key Products

Growth Drivers

• Contribution to sales in the next fiscal year and beyond from the accumulated backlog carried forward of ¥19,487 million (up 19.7% from the end of the prior fiscal year)
• Strengthening of the stable order base in building construction through a rising ratio of negotiated (sole-source) orders (from 43.1% to 62.5%)
• Improved profitability from a 3.6 percentage point improvement in gross profit margin on completed construction contracts compared to the prior fiscal year
• Expansion of orders received through strategic sales activities, including enhanced proposal capabilities in competitive bidding projects
• Improvement in the order environment driven by robust construction demand (solid in both public and private sectors)

Risks

• Risk of continued rise in construction costs (materials and subcontracting expenses) compressing profit margins (next fiscal year segment profit is forecast to decline 41.9% year on year)
• Risk of labor shortages and rising labor costs due to the "2024 Problem" (overtime work cap regulations)
• Risk of fluctuation in period profit/loss due to timing gaps in revenue recognition arising from the large number of recently commenced projects
• Risk of deteriorating profitability due to intensifying order competition, even though there is no concentration of sales on a single customer
• Risk of budget cuts and changes in the bidding environment in the civil engineering division, which is dependent on public works
• Information disclosure management risk, as evidenced by a material correction to figures after the financial results announcement (in which the direction of the profit change was reversed)