TOTETSU KOGYO CO., LTD.

Business Details

This segment handles civil engineering works in general (planning, design, construction, and supervision), with East Japan Railway Company (JR East) as its principal customer. It undertakes work essential to ensuring safe and stable railway transport, including seismic reinforcement measures, platform door installation, station renovation works, and large-scale Shinkansen refurbishment. A portion of construction work is outsourced to consolidated subsidiaries Totetsu Maintenance Kogyo Co., Ltd. and Zenyo Co., Ltd. In FY2026 (ending March 2026), net sales were ¥107,980 million, accounting for approximately 70.2% of consolidated completed construction value, making this the core business segment.

Recent Overview

Both sales and profit increased, but orders received and backlog declined; railway ratio rose

In FY2026 (ending March 2026), sales in the Civil Engineering Business were ¥107,980 million (up 7.1% year on year) and segment profit was ¥9,830 million (up 14.6% year on year), achieving both higher sales and higher profit. The railway ratio of completed construction value rose to 84.6% (from 79.1% in the prior period). On the other hand, orders received declined to ¥99,300 million (down 1.2% year on year) and the backlog carried forward to next period decreased to ¥74,401 million (from ¥83,082 million in the prior period), warranting attention to the impact on future sales levels. The increase in tangible and intangible fixed assets rose sharply to ¥3,581 million (from ¥1,717 million in the prior period), reflecting accelerated mechanization and capital investment.

Key Products

Growth Drivers

• Continued expansion of demand for JR East project-related construction (large-scale earthquake countermeasures, seismic reinforcement, platform door installation, large-scale Shinkansen refurbishment)
• Rising railway sales ratio driven by expansion of sales to private railways (¥126,216 million in FY2026, up 9.1% year on year)
• Expansion of business scope in response to the maintenance system needs of public and private railway operators
• Expansion into railway-adjacent works and aging infrastructure countermeasure fields (priority business areas under Action Plan 2029)
• Productivity improvement and strengthened construction capacity through increased large track maintenance machinery holdings and DX promotion

Risks

• Downward pressure on future sales due to the year-on-year decline in orders received (¥99,300 million, down 1.2% year on year) and the decrease in backlog carried forward to next period (¥74,401 million versus ¥83,082 million in the prior period)
• Risk of sales concentration with East Japan Railway Company (sales to the company amounted to ¥118,458 million of consolidated completed construction value)
• Difficulty maintaining construction capacity due to shortages of skilled workers and labor shortages in the construction industry
• Risk of increased construction costs due to rising material and outsourcing costs and the response to requests for price pass-through to subcontractors
• On-site inspection conducted by the Japan Fair Trade Commission in November 2025 concerning suspected Antimonopoly Act violations related to bidding for track maintenance works for the Toei Subway and others (investigation ongoing)

Business Details

This segment's business scope covers building construction in general (planning, design, construction, and supervision), with East Japan Railway Company as its principal customer. It has a structure whereby a portion of construction work is outsourced to the consolidated subsidiary Totetsu Sokken Co., Ltd. Centered on railway-related construction such as station elevation works and new station construction, construction of commercial facilities and office buildings, and large-scale development works adjacent to stations, it also undertakes building construction works for private operators. In FY2026 (ending March 2026), net sales were ¥45,905 million (down 7.6% year on year), accounting for approximately 28.2% of total consolidated net sales.

Recent Overview

Net sales declined 7.6% year on year, but segment profit rose 17.3% due to improved profit margin

In FY2026 (ending March 2026), the Building Construction Business saw a decline in sales, with orders received of ¥46,060 million (down 5.9% year on year) and net sales of ¥45,905 million (down 7.6% year on year). On the other hand, segment profit rose significantly to ¥6,368 million (up 17.3% year on year), and the profit margin improved to 13.9%. The company undertook safety-focused construction such as large-scale earthquake countermeasure works, platform door installation, and station facility renovation works for JR East, while also constructing large-scale works such as station elevation works and commercial facilities/office buildings. The backlog carried forward to next period stood at ¥33,689 million, securing a slight increase compared to the end of the prior period.

Key Products

Growth Drivers

• Continued receipt of orders for JR East's large-scale project-related construction (station elevation works, commercial facilities, office building construction, etc.)
• Expanding demand for safety investment such as large-scale earthquake countermeasure works, platform door installation, and promotion of barrier-free facility installation
• Medium- to long-term expansion of needs for ensuring safe and stable transport, such as large-scale Shinkansen refurbishment works
• Improved construction efficiency and profitability through proprietary technologies such as weld-free construction methods
• Growing demand for service-life extension works for building structures owned by private operators

Risks

• Reduction in the scale of sales due to declining orders in general private-sector works (orders received in FY2026 fell 5.9% year on year)
• Risk of divergence in estimated total construction costs due to rising material prices and outsourcing costs
• Constraints on construction capacity due to shortages of skilled workers
• Risk of customer concentration due to sales dependence on JR East
• Risk of deteriorating profitability in private-sector works, where the ratio of competitive bidding is high

Business Details

This segment consists of two consolidated subsidiaries—Totetsu Kiko Co., Ltd. (manufacture, inspection, and repair of track maintenance machinery) and Kowa Kasei Co., Ltd. (manufacture and sale of railway-related products)—together with businesses operated directly by Totetsu Kogyo itself, including leasing of commercial buildings and similar properties, power generation, and environmental businesses such as greening. The principal customers are railway operators, including East Japan Railway Company. Sales are mainly derived from revenue from the manufacture and sale of railway-related products, and the segment plays a role complementing the group's construction businesses in terms of technology and products.

Recent Overview

Both sales and profit declined year on year, as demand for railway-related products remained sluggish

In FY2026 (ending March 2026), net sales were ¥9,132 million (down 4.3% year on year) and segment profit was ¥1,400 million (down 6.9% year on year), with both sales and profit falling short of the prior period. The main cause was a decline in revenue from the manufacture and sale of railway-related products, which constitute the main component of sales. On the other hand, segment assets increased year on year to ¥13,207 million, and fixed asset investment (¥167 million) also expanded from the prior period (¥77 million). Inter-segment internal sales increased to ¥2,101 million from ¥1,713 million in the prior period, indicating expanded supply of products and services to the group's construction businesses.

Key Products

Growth Drivers

• Expanding demand for railway-related products and track maintenance machinery driven by growing needs among public and private railway operators to maintain their maintenance systems
• Increased demand within the group associated with the increase and functional enhancement/renewal investment in large track maintenance machinery under the medium-term management plan 'Action Plan 2029' (a technology development and mechanization investment plan of approximately ¥700 million over five years)
• Medium- to long-term expansion of demand for track maintenance machinery and railway-related products accompanying expanding needs for ensuring safe and stable transport, such as large-scale Shinkansen refurbishment works
• Continuation of stable stock revenue from the real estate leasing business

Risks

• Risk of fluctuation in internal demand linked to order trends in the construction businesses (civil engineering and building construction) (inter-segment internal sales exist)
• Fluctuation in demand for track maintenance machinery and railway-related products due to changes in railway operators' capital investment plans
• Risk of increased manufacturing costs due to rising material and raw material prices
• Undergoing an on-site inspection by the Japan Fair Trade Commission in November 2025 concerning suspected Antimonopoly Act violations related to bidding for track maintenance works for the Toei Subway and others, with unclear impact on the order-taking environment for the group as a whole