Daisan managed to grow in the year to April, just not very profitably. The scaffolding and construction-services group increased revenue 2.8% to ¥11.139 billion, but operating profit fell 27.5% to ¥268 million, pulling the operating margin down to 2.4% from 3.4% a year earlier. Ordinary profit slipped 15.9% to ¥290 million and net profit attributable to owners fell 21.8% to ¥262 million.
The squeeze was mostly about cost, not collapse in sales
The company said revenue was broadly in line with expectations, even though Japan’s housing-start market saw temporary disruption in the first half after changes to the Building Standards Act. The bigger problem was cost. Daisan hired more workers than planned, including a front-loaded expansion of overseas personnel, which took installation headcount to a record level. That may help future capacity, but it also raised fixed labor costs and brought onboarding and training expenses before those workers were fully deployed. In Singapore, higher worker-related charges under government policy and unexpectedly high dormitory costs added to the bill, while adviser fees and other review costs tied to business expansion pushed selling, general and administrative expenses higher.
That is why the miss against Daisan’s own earlier forecast was mostly a margin story. Sales came in 3.1% below plan, but operating profit was 36.0% lower than forecast, with ordinary profit 29.0% below and net profit 20.5% below.
Services held up, product sales did not
The core construction-service business still expanded. Segment sales rose 6.0% to ¥7.669 billion, helped by share gains with existing customers and pricing efforts, though gross profit edged down 0.7% to ¥2.118 billion. Product sales were weaker: revenue fell 14.5% to ¥1.009 billion and gross profit dropped 8.6% to ¥275 million, which Daisan linked to customer restraint and a reversal after demand had been lifted in the prior year by the legal change. Overseas operations were steadier, with sales up 1.5% to ¥2.399 billion and gross profit up 4.4% to ¥756 million. Daisan also added a Singapore subsidiary to the consolidation scope during the year after its importance increased.
The group-level math is blunt enough. Gross profit was almost flat at ¥3.204 billion, but SG&A rose to ¥2.935 billion from ¥2.839 billion, leaving much less room for operating earnings.
Cash improved, but the outlook stays tight
Balance-sheet stress was not the main issue. Cash and deposits rose to ¥2.689 billion from ¥2.220 billion, total assets were roughly unchanged at ¥10.18 billion, and the equity ratio improved to 56.2% from 54.6%.
For the current year, Daisan is guiding for sales of ¥12.0 billion and operating profit of ¥280 million, which would amount to only a mild operating recovery, while ordinary profit is seen falling to ¥220 million and net profit to ¥130 million. The annual dividend for the year just ended is ¥22 per share, and the company plans to keep it there this year. In other words, Daisan is still spending to build capacity, but investors are being asked to wait a bit longer for the payoff.