ENVIRONMENTAL CONTROL CENTER CO.,LTD.

Business Details

Founded in 1971. The company's core business is the environmental measurement certification business under the Measurement Act, conducting measurement and analysis of all environmental media including air, water quality, soil, and noise. It has expanded into 13 fields including policy consulting, assessment, construction, contract testing, agriculture, and radioactivity. Its customers are government agencies (26.9% of cumulative revenue for the third quarter of FY2026 (ending June 2026)) and private companies (73.1%). Under the Second Medium-Term Management Plan (FY2025–FY2027, ending June 2027), the company is advancing key initiatives focused on enhancing human capital value, promoting new businesses, and expanding growth fields.

Recent Overview

Order backlog surged 160% year on year to ¥4,343 million on large-scale construction orders

Cumulative revenue for the third quarter of FY2026 (ending June 2026) (July 2025–March 2026) decreased to ¥4,319 million (down 18.2% year on year), but the order backlog surged to ¥4,343 million (up 160.5% year on year) due to large-scale construction orders (orders received of ¥2,704 million, up 407.1% year on year). Large-scale construction orders received in the current period are scheduled for revenue recognition from the next fiscal year onward. Gross profit margin improved significantly to 29.7% (versus 24.0% in the same period prior year), and net income attributable to owners of the parent increased to ¥188 million (up 9.4% year on year). Ordinary income decreased to ¥312 million (down 7.5% year on year) due to increased interest expenses and commission fees paid. In March 2026, the company renewed a commitment line agreement totaling ¥2,000 million with five partner banks to secure financial liquidity. The full-year earnings forecast remains unchanged (revenue of ¥6,200 million, operating income of ¥340 million).

Key Products

Growth Drivers

• Accumulation of large-scale orders in the construction field: cumulative third-quarter orders received of ¥2,704 million (up 407.1% year on year) and an order backlog of ¥2,599 million, with revenue recognition expected from the next fiscal year onward
• High growth in the soil and groundwater field: cumulative third-quarter revenue of ¥850 million (up 37.2% year on year) and orders received of ¥931 million (up 44.9%), driven by expanding demand from private companies for the sale and purchase of former factory sites
• Maintaining a high order backlog in the assessment field: an order backlog of ¥943 million at the end of the third quarter, securing a stable order base
• Structural improvement in gross profit margin: low-margin projects in the construction field have been phased out, leading to a significant improvement in cumulative third-quarter gross profit margin to 29.7% (versus 24.0% in the same period prior year)
• Advancement of the Second Medium-Term Management Plan (FY2025–FY2027, ending June 2027): promoting key initiatives including enhancing human capital value, promoting new businesses, DX strategy, expanding growth fields, and optimizing foundational fields
• Expansion of revenue from government agencies: cumulative third-quarter revenue from government agencies of ¥1,161 million (up 3.4% year on year), with its share rising to 26.9% (from 21.3% in the same period prior year)

Risks

• Seasonal fluctuation risk: with approximately one-third of annual revenue concentrated in March, the company typically incurs an operating loss through the second quarter, increasing funding needs. The full-year progress rate based on cumulative third-quarter revenue was 86.5%
• Customer concentration risk in the construction field: the order backlog of ¥2,599 million for large-scale construction projects may be concentrated among specific customers or projects, meaning trends in these transactions could significantly affect results in the next fiscal year
• Funding liquidity risk: short-term borrowings increased to ¥1,530 million at the end of the third quarter (up ¥650 million from the end of the prior fiscal year), and long-term borrowings also increased to ¥575 million (up ¥388 million), expanding interest-bearing debt. The equity ratio declined to 38.3% (from 42.7% at the end of the prior fiscal year)
• Increase in interest and commission expenses: cumulative third-quarter interest expenses paid rose to ¥22 million (up ¥7 million year on year) and commission fees paid rose to ¥26 million (up ¥25 million), with non-operating expenses surging and pressuring ordinary income
• Risk related to revenue recognition of the order backlog in the next fiscal year: the ¥2,599 million order backlog for large-scale construction projects is scheduled for revenue recognition from the next fiscal year onward, but there is a possibility that revenue may not be recognized as planned due to construction delays, contract changes, or other factors
• Decline in orders in the assessment field: cumulative third-quarter orders received decreased to ¥595 million (down 30.8% year on year), and replenishing orders after depleting the ¥943 million backlog is a challenge
• Profit pressure from excessive competition: price competition continues in the environmental measurement, analysis, and monitoring services market, and selling, general and administrative expenses rose to ¥940 million (up 1.9% year on year), reflecting an upward trend in fixed costs