Nisso Group (3440) Q3 FY2026 Earnings Deep Dive Report: Analysis of Growth Strategy and Performance Trends

Nisso Group (Securities Code: 3440) has announced its financial results for the third quarter of the fiscal year ending August 2026. In this quarter, both net sales and various profit items decreased year-on-year, primarily due to one-off M&A related expenses and fluctuations in specific businesses. Meanwhile, the company is steadily advancing its 4th Mid-Term Management Plan, clearly demonstrating its commitment to expanding business domains through M&A, launching new businesses, improving capital efficiency, and focusing on shareholder returns.

Q3 Earnings Highlights and Factor Analysis

For the nine months ended May 31, 2026 (September 1, 2025 – May 31, 2026), consolidated results showed net sales of 15,476 million yen (down 15.3% year-on-year) , operating profit of 514 million yen (down 63.7% year-on-year) , and EBITDA of 1,269 million yen (down 36.0% year-on-year) . All key performance indicators decreased compared to the previous year.

The main factors contributing to this performance fluctuation are as follows:

• Metal Processing Business: While data center-related projects performed well, orders for solar panel support frames and metal sandwich panels decreased.
• Chemical Products Business: Performance of Taiho and Izumi Seisakusho, consolidated subsidiaries from M&A in the previous fiscal year, contributed to increased revenue and profit.
• Construction Business: A significant decrease in revenue and profit was observed due to a reactionary decline from a concentrated period of large-scale projects in the previous year, coupled with sluggish acquisition of new orders.
• Lifestyle Business: Revenue decreased primarily due to a nationwide decline in housing demand affecting tile sales. Costs associated with the upfront investment phase for Kanaete, acquired through M&A, also had an impact.
• One-off Expenses: M&A fees of 239 million yen related to the acquisition of B SLASH HOLDINGS shares were recorded as a one-off expense, depressing operating profit.

These factors, particularly the decline in the Construction business and M&A-related expenses, led to a significant reduction in overall profit.

Revision of Full-Year Earnings Forecast

Based on the results up to the third quarter and future outlook, Nisso Group has revised its consolidated full-year earnings forecast for the fiscal year ending August 2026. The revised forecast projects net sales of 20,500 million yen (down 3,100 million yen from the initial forecast, a 11.0% decrease year-on-year) , operating profit of 300 million yen (down 600 million yen, a 78.3% decrease year-on-year) , and EBITDA of 1,339 million yen (down 602 million yen, a 37.6% decrease year-on-year) .

The primary reasons for this revision include a decrease in solar panel support frames and metal sandwich panels in the Metal Processing business, changes and delays in construction periods due to project plan revisions in the Construction business, sluggish acquisition of new orders, and a period with fewer delivery items from the four companies including B SLASH HOLDINGS. Additionally, a special gain is expected to be recorded from the transfer of shares of subsidiary Dairitsu.

Trends in Construction Business Order Backlog

The order backlog in the Construction business is a crucial indicator for future performance. This slide provides a detailed view of the trends in the Construction business order backlog, particularly highlighting the impact of Tokyo redevelopment projects . The graph shows a significant accumulation of order backlog from Q4 2022 to Q1 2023 due to an increase in Tokyo redevelopment projects. However, since Q2 2025, as these special demand projects have been processed, the order backlog has been on a declining trend. As of Q3 2026, the order backlog stands at 5,283 million yen , representing a 31.8% increase year-on-year, which also includes an increase in order backlog due to M&A. With the processing of special demand projects progressing, it is indicated that the order backlog will return to normal levels, with an overall bottoming out in Q3 . This trend directly impacts future sales in the Construction business, making the acquisition of new orders a key focus going forward.

Growth Strategy and Progress of Mid-Term Management Plan

Nisso Group is pursuing its 4th Mid-Term Management Plan with the vision of being a "corporate group that challenges the future with the power of creation." The basic policies are as follows:

1. M&A Investment (Emphasized as a Growth Driver): A 5 billion yen investment framework is set to pursue business domain expansion and synergy creation.
2. Upfront Investment (For Mid-to-Long Term Growth): 1 billion yen is allocated for investment in human resources, new businesses, and new product development to build a foundation for mid-to-long term growth.
3. Expansion of Group Support System through Holding Company Structure: To provide multifaceted support to the increasing number of group companies due to M&A, the company is promoting the recruitment and development of professional talent, referred to as the "Seven Samurai."
4. Management Conscious of Capital Cost and Share Price: The company aims to improve capital efficiency, targeting a PBR of 1x or higher and an ROE of 8%.

The company positions M&A as the core of its growth strategy, and M&A has played a significant role in its business model evolution. This slide illustrates the evolution of Nisso Group's business model and the long-term trends in net sales and EBITDA . Starting from its "Fukuoka Stock Exchange Q-Board Listing" in 2007-2008, the company progressed through "Solar Panel Support Frame Special Demand" and "M&A-driven Growth Strategy Change," and is now in the phase of "Group Support System through Holding Company Structure" and "Initiation of Growth Investments." Particularly noteworthy is the strong growth in net sales and EBITDA since 2013, when the M&A strategy was fully implemented. The CAGR since its Q-Board listing shows high growth rates of 13.1% for net sales and 8.5% for EBITDA, clearly indicating that M&A has been a key driver of the company's growth. This historical data provides crucial context for evaluating the effectiveness of future M&A strategies.

For the 4th Mid-Term Management Plan, the quantitative targets for the fiscal year ending August 2027 are consolidated net sales of 30 billion yen and EBITDA of 2.7 billion yen . This slide specifically details the quantitative targets of the 4th Mid-Term Management Plan, the contribution of each business segment, and the progress of M&A and upfront investments . It shows the trajectory of net sales and EBITDA from the actual results of FY2024 to the targets for FY2027. Notably, high growth targets are set for the overall CAGR including M&A: 19.2% for net sales and 12.4% for EBITDA. The stacked targets for each segment are also clearly defined, with the Lifestyle business planned to drive the largest growth. Furthermore, it indicates that 2.75 billion yen out of the 5 billion yen M&A investment framework has already been utilized as of August 2025, and 0.72 billion yen out of the 1 billion yen upfront investment framework has also been utilized. This progress suggests that the mid-term management plan is being steadily executed, providing essential information for evaluating the feasibility of future growth strategies.

Initiatives in New Businesses

As a mid-to-long term growth driver, the company is also focusing on launching new businesses. Nisso Engineering has started a renewable energy power plant development business . This aims to build an integrated value chain from the development of solar power plants to O&M (operation and maintenance), thereby increasing added value. Corporate registration was completed in February 2026, and the plan is to open 35 power plants (87.92MW scale) over the next five years.

Awareness of Capital Efficiency and Shareholder Returns

The company emphasizes management conscious of capital cost and share price, targeting a PBR of 1x or higher and an ROE of 8%. Specifically, it aims to improve PBR through enhancing "earning power," "growth expectations," and "trust." Regarding shareholder returns, the company recognizes sustainable growth and enhancement of corporate value as important management issues. It plans to allocate funds to growth investments while continuously paying dividends based on business performance. It also states that it will consider share buybacks when appropriate.

Conclusion

In the third quarter of the fiscal year ending August 2026, Nisso Group experienced a temporary slowdown in performance and revised its full-year forecast downwards, primarily due to a reactionary decline in special demand for the Construction business and M&A-related expenses. However, these are considered temporary factors and plan adjustments. The company's mid-to-long term direction, which includes a growth strategy centered on M&A , aggressive investment in new businesses , and management conscious of capital efficiency and shareholder returns , remains unchanged. In particular, past M&A growth achievements and specific quantitative targets and investment progress in the mid-term management plan are crucial elements supporting the future growth story. Trends in the Construction business order backlog, progress in the new renewable energy power plant development business, and the creation of new synergies through M&A will be key to future performance recovery and sustainable growth.