Sekisui House, Ltd.

Q1 revenue was 8,940億円, up 1,169億円 year over year and a first-quarter record. Gross profit was 1,796億円, up 185億円, but gross margin fell 0.6pt to 20.1%. SG&A was 1,193億円, up 300億円, and SG&A ratio rose 1.8pt to 13.3%. Operating profit was 602億円, down 114億円, with operating margin at 6.7%. Ordinary profit was 468億円, down 241億円; net income attributable to owners was 333億円, down 170億円; EPS was 51.49円, down 26.34円. On the balance sheet, total assets were 4兆7,264億円, interest-bearing debt was 1兆9,539億円, D/E ratio was 1.04x, and equity ratio was 39.9%. Cash and equivalents were 3,094億円. Cash flow from operations was マイナス1,623億円, investing cash flow was マイナス284億円, and free cash flow was マイナス1,907億円. Management said the full-year guidance remains unchanged for now, with U.S. homebuilding to be managed flexibly and possible additional asset sales in domestic redevelopment if needed.

Toru Ishii said the company is prioritizing profitability over volume in U.S. homebuilding, noting that the market is still solid but buyers are cautious because of economic uncertainty and higher mortgage rates. He said the group will use fewer incentives if possible, improve cycle time, reduce costs, and continue to manage the business as a one-company structure after the MDC integration. On domestic redevelopment and other businesses, he said the company has options to accelerate sales of assets if needed to offset U.S. weakness, while also saying the other overseas businesses are progressing on plan.

Toru Fujita emphasized that Q1 revenue reached a first-quarter record because MDC contributed from the start of the fiscal year, and domestic high-value proposals supported stable growth in contract and stock businesses. He explained that gross margin fell because of fewer domestic redevelopment property sales and lower U.S. homebuilding profitability, while SG&A rose mainly because MDC’s expenses were added. He gave specific cash and purchase-accounting figures for MDC: annual goodwill/trademark amortization is about 170億円 to 180億円, Q1 inventory step-up amortization was about 46億円, and fiscal 2025 step-up amortization is expected at about 150億円 to 160億円; he also said there was no major one-time PMI charge in Q1.

Analysts focused on why MDC’s U.S. homebuilding margins and deliveries were weaker than peers, how much buydown incentives are being used, and whether the company would need to cut prices further to hit volume targets. Management said about 70% of current MDC activity uses buydowns, but the drop in deliveries was also tied to a very light starting backlog after earlier pull-forwards, and they said MDC’s lower margin decline was not far from the average among large U.S. builders, with weakness concentrated in Arizona, Colorado, and Florida. Another major topic was whether domestic redevelopment or other asset sales would be used to offset U.S. weakness; management said additional asset-sale discussions are already underway and that some large domestic assets, including potential JV or monetization structures, could be used if needed.