[Obayashi] Domestic Civil Engineering — Resilience Spending Supports 9.6% Margin

Note: This article is a factual summary based on Obayashi Corporation’s published IR material (Investors’ Guide, June 2026 edition). It is not a recommendation to buy or sell any security. Figures are as of the publication of the source material. Investment decisions are your own responsibility.

Domestic civil engineering is the smaller of Obayashi’s two core domestic construction businesses — civil engineering here covers infrastructure work such as railways, roads, dams, ports, and disaster-resilience projects, as distinct from the buildings covered in our domestic building article. It is also the more profitable of the two: in FY2025 the segment posted consolidated net sales of ¥426.6bn and operating profit of ¥40.9bn, a 9.6% margin that edges out domestic building’s 9.1% (p.10). Together, domestic building and domestic civil engineering make up Obayashi’s domestic construction business, historically the group’s core profit engine (see Company Overview). This article covers the segment’s FY2025 results, where its orders come from, and the demand and supply-side forces shaping it.

FY2025 results: consolidated and non-consolidated

Obayashi discloses both consolidated (group-wide, including subsidiaries) and non-consolidated (parent-company-only) figures for this segment. The gap between the two — ¥426.6bn consolidated versus ¥340.0bn non-consolidated net sales — reflects the contribution of Obayashi’s domestic civil-engineering subsidiaries alongside the parent company itself.

Metric	Consolidated	Non-consolidated
Net sales (completed construction)	¥426.6bn	¥340.0bn
Orders received	¥444.2bn	¥351.9bn
Operating profit	¥40.9bn	—
Operating margin	9.6%	—

Orders received (¥444.2bn consolidated) ran ahead of net sales (¥426.6bn), pointing to a solid order backlog heading into FY2026. Obayashi does not separately disclose non-consolidated operating profit for this segment. Both net-sales figures are smaller than domestic building, which posted ¥1,138.7bn in consolidated net sales over the same period (see Domestic Building), but civil engineering is the higher-margin of Obayashi’s two domestic construction businesses.

Where the orders come from

Obayashi breaks down four years of non-consolidated orders received by construction purpose. Railroads and roads are consistently the two largest named categories, though their relative weight has swung considerably from year to year.

Purpose	FY2022	FY2023	FY2024	FY2025
Railroads	24.4%	21.3%	8.3%	28.5%
Roads	19.2%	24.6%	22.0%	26.3%
Soil and river construction	6.7%	4.9%	9.0%	2.4%
Water supply and sewers	7.2%	12.3%	4.8%	6.1%
Land development	5.5%	6.7%	9.5%	8.8%
Others	37.0%	30.2%	46.4%	27.9%

Railroads swung from 24.4% of orders in FY2022 down to just 8.3% in FY2024, before rebounding to 28.5% in FY2025 — the largest single named category that year. Roads moved more steadily upward, from 19.2% to 26.3% over the same four years, consistent with the expressway-renewal demand described below. Water supply and sewers and land development have stayed in single-to-low-double-digit territory throughout, while the ‘Others’ category, which is not broken out further, has ranged from 27.9% to as high as 46.4% of orders — meaning that in most years, a substantial share of civil-engineering orders falls outside the five named purposes altogether.

Demand drivers and constraints

Obayashi frames the demand environment separately for government and private-sector clients, and its outlook for each is broadly constructive.

• Government works: firm demand in areas such as disaster prevention/mitigation and national resilience projects; a steady level of new orders expected for expressway renewal projects; an anticipated increase in new orders for defense-related facility development projects.
• Private-sector works: expected to remain firm, supported by expansion in renewable energy and decarbonization-related markets, along with railroad construction in the Tokyo metropolitan area.

Both drivers are visible in the orders-received data above: the swing toward railroads and roads in FY2025 lines up with the renewal and metropolitan-area demand Obayashi describes, while the Kawanishi Wind Farm project below is a direct example of the renewable-energy demand feeding private-sector orders.

On the supply side, Obayashi flags two constraints shared across the industry: construction capacity considerations amid increased demand and overtime cap regulations, and changes in ordering methods. The industry-wide workforce data behind this constraint is covered in our construction market article, and Obayashi’s own response to it — training, retention incentives, and Robotics Construction® — in our workforce and Robotics Construction® article.

Major projects

• Osaka Metro Chuo Line Yumeshima Station
• Chuo Expressway: Yandarugawa Bridge and nine other bridges
• Aigawa Dam
• Kawanishi Wind Farm

These four projects illustrate the segment’s range: a metro station, expressway bridge-renewal work consistent with the renewal demand noted above, a dam, and a wind farm reflecting the renewable-energy and decarbonization demand also cited above. Together they span transportation, water, and energy infrastructure — the same breadth reflected in the six named order categories above.

Combined with domestic building, domestic construction supplied 74.5% of Obayashi’s FY2025 operating profit from 60.5% of sales (see Company Overview) — and within that mix, civil engineering’s 9.6% margin is the stronger of the two. For investors, this segment’s swings in order mix from year to year are worth watching alongside the domestic building numbers, since together the two segments still generate roughly three-quarters of group profit.

This article is part of our complete breakdown of the Obayashi Investors’ Guide 2026. See the hub article for the full series.

Note: This article is a factual summary based on Obayashi Corporation’s published IR material (Investors’ Guide, June 2026 edition). It is not a recommendation to buy or sell any security. Figures are as of the publication of the source material. Investment decisions are your own responsibility.