SHIMIZU CORPORATION

Business Details

The contracting business for building construction and civil engineering work carried out by Shimizu Corporation's regional branches and headquarters. Its main customers are domestic private-sector clients (offices, logistics, housing, factories, etc.) and government agencies, with operations also extending overseas (Southeast Asia, North America, etc.). Sales account for approximately 72% of consolidated total, making it the core segment, with improvements in construction profitability serving as the primary driver of consolidated earnings. Order-taking methods are broadly divided into negotiated and competitive bidding, with the accumulation of highly profitable negotiated contracts contributing to margin improvement.

Recent Overview

Driven by significant improvement in construction profitability, segment profit expanded sharply, up 60.7% year on year to ¥90,681 million.

In FY2026 (ending March 2026), improvement in construction profitability in domestic building construction was notable, with the non-consolidated gross profit margin on completed building construction contracts rising sharply from 7.3% in the prior period to 10.8%. Non-consolidated gross profit on completed construction contracts reached ¥157,592 million (up 44.3% year on year). On the orders front, non-consolidated orders received in the Construction Business surged to ¥1,804,558 million (up 41.3% year on year), with particularly strong increases in domestic private-sector building construction orders (real estate, transportation, telecommunications, warehousing, etc.) and domestic private-sector civil engineering orders. The order backlog carried forward to the next period also remained at a high level of ¥2,568,757 million (up 14.0% year on year), providing strong visibility into future sales.

Key Products

Growth Drivers

• Increase in completed construction contract value driven by steady progress on large-scale projects on hand (non-consolidated completed contract value of ¥1,489,615 million in FY2026 ending March 2026, up 7.8% year on year)
• Significant improvement in construction profitability in domestic building construction (non-consolidated gross profit margin on completed building construction contracts: 7.3% in prior period → 10.8% in current period)
• High order backlog carried forward to next period maintained (non-consolidated backlog of ¥2,568,757 million as of March 31, 2026, up 14.0% year on year), providing visibility into future sales
• Recovery in domestic private-sector capital investment (large increases in orders from real estate at ¥409.2 billion, up 171.5% year on year; transportation/telecommunications/warehousing at ¥218.5 billion, up 109.7% year on year, etc.)
• Continued receipt of orders for large-scale redevelopment projects (TOKYO TORCH Torch Tower, Nihonbashi 1-chome Central District, Toyomi District, etc.)
• Rapid expansion in overseas orders received (non-consolidated overseas orders of ¥132,390 million, up 70.1% year on year; consolidated overseas orders of ¥242,864 million, up 81.6% year on year)
• Creation of synergies in the civil engineering and offshore wind power business fields through the consolidation of Aomi Construction Co., Ltd. as a subsidiary (March 30, 2026)

Risks

• Uncertainty in estimating total construction costs due to sustained high construction material and energy prices and rising labor costs
• Constraints on construction execution capacity due to the further worsening of labor shortages
• Risks to private-sector capital investment from overseas economic uncertainty, including the impact of U.S. trade policy
• Overseas business risks exemplified by impairment losses recorded at North American real estate subsidiaries and others (¥24,453 million recorded as extraordinary loss on a consolidated basis)
• Risk of deteriorating profitability on existing contracts on hand, as indicated by the balance of provision for loss on construction contracts (¥64,536 million on a consolidated basis as of the end of March 2026)
• Risk of fluctuation in estimated total construction costs on long-term projects (affecting revenue recognition based on percentage of completion)
• Risk of a slowdown in the pace of order backlog accumulation, given that the forecast for non-consolidated orders received in FY2027 (ending March 2027) is ¥1,550.0 billion, a significant decrease of 18.3% from the current period's actual result of ¥1,898.1 billion