Kanadevia (7004): FY2025 Results Summary — Record Orders and Sales, Profit Hit by One-Off Technology Costs

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Kanadevia Corporation (7004), which changed its company name from Hitachi Zosen on October 1, 2024, released its FY2025 financial results presentation on 12 May 2026. Order intake and net sales both reached record highs, supported by strong demand in overseas markets, while operating income fell 54.8% year on year due to one-off costs related to technology issues in overseas projects. Order backlog exceeded JPY 2 trillion, reaching a record high, and the company expects a significant recovery in operating income in FY2026.

Consolidated Results (Full-Year Actual)

Order intake rose to JPY 897.7 billion (YoY +17.2%), a record high primarily driven by large-scale WtE (Waste-to-Energy) plant orders secured by Kanadevia Inova. Net sales increased for the eighth consecutive year to JPY 645.2 billion (YoY +5.7%), a record high led by growth in the Environmental Business. Operating income declined to JPY 12.1 billion (YoY -54.8%) due to costs related to technology issues in overseas projects, a decrease in high-margin projects, and increased expenses for investment in human capital. Profit attributable to shareholders of Kanadevia fell to JPY 11.1 billion (YoY -49.6%), reflecting extraordinary losses including inappropriate quality-related losses and impairment losses. Against forecasts, order intake exceeded the initial forecast by JPY 197.7 billion, while operating income fell JPY 1.4 billion short of the previous forecast due to the conservative recognition of provisions for future risks related to technology issues; profit attributable to shareholders exceeded the previous forecast by JPY 6.1 billion due to a review of tax expenses.

Item (JPY billions)	FY24 Results	FY25 Results	YoY
Order Intake	765.9	897.7	131.8
Net Sales	610.5	645.2	34.7
Gross profit	114.1	109.1	-5.0
Selling, General and Administrative Expenses	87.2	96.9	9.7
Operating Income	26.9	12.1	-14.8
% to Net Sales	4.4%	1.9%	-2.5pt
Non-Operating Income	-2.6	1.5	+4.1
Ordinary Income	24.3	13.6	-10.7
Extraordinary Income and Loss	-0.7	-2.6	-1.9
Profit attributable to Shareholders of Kanadevia	22.1	11.1	-11.0

Segment Results

In the Environment Business, order intake rose to JPY 726.0 billion and net sales to JPY 505.2 billion, with both EPC and O&M increasing on strong overseas WtE and water businesses, including a CO2 capture facility project in the UK; operating income declined to JPY 16.7 billion due to costs related to technology issues at Inova, including provisions for future risks. In the Machinery & Infrastructure Business, order intake, net sales, and operating income decreased due to the transfer of the Press business subsidiary (May 2025) and deterioration in the performance of the Bridge business, resulting in an operating loss of JPY 2.4 billion. In the Carbon Neutral Solution Business, order intake increased on marine engine timing differences, but operating income fell to a loss of JPY 2.5 billion due to project delays at NAC (a subsidiary in the nuclear-related equipment business) and deterioration in profitability of the marine engine business.

Segment	Metric (JPY billions)	FY25	FY24
Environment	Order Intake	726.0	617.4
Environment	Net Sales	505.2	453.5
Environment	Operating Income	16.7	25.4
Machinery & Infrastructure	Order Intake	89.5	91.2
Machinery & Infrastructure	Net Sales	68.5	83.0
Machinery & Infrastructure	Operating Income	-2.4	1.0
Carbon Neutral Solution	Order Intake	79.9	54.0
Carbon Neutral Solution	Net Sales	69.2	70.2
Carbon Neutral Solution	Operating Income	-2.5	0.1

Order Intake and Order Backlog

Order backlog exceeded JPY 2 trillion, reaching a record high of JPY 2,284.7 billion, driven by large-scale projects at Inova and M&A. The company states that it has secured a long-term earnings base supported by an order backlog equivalent to approximately four times annual revenue, with a composition of O&M 64% and EPC 36%. For FY26, the company forecasts order intake of JPY 810.0 billion and an order backlog of JPY 2,449.4 billion.

Item (JPY billions)	FY23	FY24	FY25	FY26 Forecast
Order Intake	715.1	765.9	897.7	810.0
Order Backlog	1,543.4	1,796.4	2,284.7	2,449.4

FY2026 Forecast

For FY26, Kanadevia forecasts net sales of JPY 640.0 billion and operating income of JPY 25.5 billion (+13.4 billion from FY25). Risk-related costs for technology issues were already provisioned in FY2025, and the absence of one-off costs is expected to drive a significant recovery in operating income. Order intake is forecast at JPY 810.0 billion, remaining at a high level in the Environmental Business while decreasing in some businesses due to portfolio transformation, including deconsolidation of the marine engine subsidiary. Profit attributable to shareholders of Kanadevia is forecast at JPY 21.0 billion, which includes costs related to quality issues as well as gains on sale of subsidiary shares and business transfers.

Item (JPY billions)	FY25 Results	FY26 Forecast	Difference
Order Intake	897.7	810.0	-87.7
Net Sales	645.2	640.0	-5.2
Operating Income	12.1	25.5	+13.4
% to Net Sales	1.9%	4.0%	+2.1pt
Ordinary Income	13.6	22.0	+8.4
Profit attributable to Shareholders of Kanadevia	11.1	21.0	+9.9

Shareholder Returns

Despite a decline in earnings in FY25, the company maintained the annual dividend at 25 yen per share (consolidated payout ratio 38%). For FY26, it plans to increase the dividend to 38 yen per share (+13 yen), with a payout ratio of 30%, in line with earnings recovery and a new policy. As its basic policy, the company targets a dividend payout ratio of approximately 30% and will continue to implement progressive dividends while balancing business performance trends and growth investments.

Medium-Term Plan / Topics

FY2025 was the final year of the medium-term management plan “Forward 25.” Order intake of JPY 897.7 billion and net sales of JPY 645.2 billion significantly exceeded the FY2025 targets of JPY 600.0 billion and JPY 560.0 billion respectively, both reaching record highs. Operating income of JPY 12.1 billion and ROE of 5.8% fell short of the targets of JPY 28.0 billion and 9.5% due to temporary factors. Business portfolio restructuring is progressing: new orders in the Bridges business have been suspended since February 2026, all shares of vacuum valve subsidiary V TEX are scheduled to be transferred as of June 1, 2026, the all-solid-state batteries business transfer is scheduled as of July 1, 2026, and part of the shares of Hitachi Zosen Marine Engine were transferred as of March 31, 2026, changing it to an equity-method affiliate (65% to 40%).

Regarding the business integration consideration with Nippon Steel Engineering Co., Ltd., due diligence has been underway since the announcement on February 5, 2026, aiming for a final agreement in September 2026; the company notes that no decisions have been made at this point. Under its capital allocation policy for achieving the “2030 Vision,” the company targets net sales of 1 trillion yen (in the 2030s), an operating margin of 10%, and ROE of over 10%, and expects ROE to recover to 10.2% in the FY26 forecast.

This article is an analysis based on publicly available information and is not a recommendation to buy or sell any specific securities. Investment decisions are your own responsibility.