Sanyo Engineering & Construction Inc.

Business Details

The group's core segment, which conducts indoor and outdoor electrical facility construction, interior communication facility construction, and various plant electrical instrumentation facility construction (Interior Wiring Construction), transmission and distribution line and power generation/substation facility construction (Electric Power Construction), and air conditioning and water supply/drainage facility construction (Air Conditioning & Plumbing Construction). In addition to Japan, the segment operates in Southeast Asia and Other Asia through consolidated subsidiaries and equity-method affiliates. In the current consolidated fiscal year, overseas construction revenue consisted of Southeast Asia (of which Malaysia accounted for ¥16,336 million) and Japan domestic revenue of ¥34,951 million.

Recent Overview

Despite lower revenue, thorough process and cost management drove a large 33.4% year-on-year increase in operating profit

Revenue in the Facilities Construction Business for FY2026 (ending March 2026) was ¥60,505 million (down 10.1% year on year), impacted by the decline following the large-scale Malaysia project in the prior period and a decrease in Interior Wiring Construction. On the other hand, gross profit improved through thorough process and cost management, and operating profit reached ¥3,376 million (up 33.4% year on year). Equity in earnings of affiliates also increased significantly to ¥219 million (from ¥20 million in the prior period). In the current period, revenue from the major customer LEIGHTON CONTRACTORS (MALAYSIA) SDN. BHD. was ¥9,916 million, accounting for over 10% of consolidated revenue. In the Electric Power Construction segment, design changes and other factors associated with the completion of multiple large-scale projects contributed to increased profit, but this factor is not expected to recur in the next fiscal year (FY2027, ending March 2027).

Key Products

Growth Drivers

• A sharp increase in orders received in the Electric Power Construction segment due to the acquisition of large-scale transmission line projects (orders received of ¥11,810 million in FY2026, ending March 2026, up 125.7% year on year)
• A significant increase in orders received in the Air Conditioning & Plumbing Construction segment (orders received of ¥9,024 million in FY2026, ending March 2026, up 92.7% year on year), contributing to revenue in the next fiscal year
• Improvement in gross profit margin through thorough process management and cost management (operating margin of 5.6% in FY2026, ending March 2026, improved from 3.8% in the prior period)
• Expanded profit contribution from equity-method affiliates (equity in earnings of affiliates of ¥219 million, more than 10 times the prior period)
• Continued promotion of productivity and profitability improvement measures through operational efficiency and DX initiatives under the 14th Medium-Term Management Plan
• Continued domestic construction demand supported by resilient public investment and a recovery in private-sector capital investment

Risks

• Risk of fluctuation in overseas construction revenue following the decline after the large-scale Malaysia project (Southeast Asia revenue of ¥23,139 million in FY2026, ending March 2026, down significantly from ¥30,830 million in the prior period)
• Risk of declining profit margin in the Electric Power Construction segment as the current period's profit-boosting factors, such as design changes, are not expected to recur in the next period
• Risk of continued revenue decline in the Interior Wiring Construction segment (¥43,777 million in FY2026, ending March 2026, down 17.1% year on year)
• Risk of construction cost overruns due to rising material prices and increased labor costs
• Risk related to resource supply and material price fluctuations amid heightened tensions in the Middle East (impact on business performance currently undetermined)
• Risk of foreign exchange fluctuations and country risk associated with the rising proportion of overseas construction
• Risk of additional provisions for construction contract losses (due to additional costs exceeding initial estimates, etc.)
• Risk of lost order opportunities due to construction capacity constraints (order intake in the Interior Wiring Construction segment is managed in consideration of construction capacity)