Q1 revenue growth failed to translate into profit; FY2027 H1 will be the proving ground for a return to profitability

Revenue for the first quarter of FY2027 ending March 2027 was ¥74,289 million, up ¥15,455 million, or 28.5%, from ¥57,834 million in the same period of the previous year. However, operating results deteriorated from a ¥199 million profit to a ¥525 million loss, ordinary results from a ¥162 million profit to a ¥551 million loss, and quarterly net income attributable to owners of the parent from a ¥159 million profit to a ¥555 million loss. The operating margin also fell from approximately 0.34% in the same period of the previous year to approximately -0.71% in the current period, indicating that revenue growth alone has not been sufficient to secure profit.

Q1 revenue represented approximately 24.8% of the full-year revenue forecast of ¥300,000 million, broadly in line with the 25% of the fiscal year that had elapsed. Meanwhile, the revised cumulative first-half forecast is revenue of ¥146,000 million, operating profit of ¥260 million, ordinary profit of ¥200 million and net income of ¥10 million. After deducting Q1 actual results, this implies that the second quarter alone would generate approximately ¥71,711 million in revenue, ¥785 million in operating profit, ¥751 million in ordinary profit and ¥565 million in net income. In particular, operating profit must swing sharply from a loss to a substantial profit.

The full-year forecasts are revenue of ¥300,000 million, operating profit of ¥1,770 million, ordinary profit of ¥1,600 million and net income of ¥1,000 million. If the cumulative first-half forecasts are achieved, the second half would need to generate revenue of ¥154,000 million, operating profit of ¥1,510 million and net income of ¥990 million, implying a full-year operating margin of approximately 0.59%. Accordingly, the key point to assess at the H1 results is not only revenue progress, but also the extent to which inventory valuation losses and market-related factors have subsided in Q2 and whether operating profit returned to the black.

The company cited inventory valuation losses following a decline in precious-metals prices, reduced capital investment by small and midsize companies, the machinery segment’s main customers, and inventory valuation losses in the content segment as factors behind the deterioration in Q1. However, it has not disclosed a breakdown by factor or the information needed to determine whether the valuation losses are temporary or ongoing. At H1, key points will include not only whether operating profit of ¥260 million was achieved, but also the breakdown of the profit recovery, including the amount of valuation losses, the impact of market movements and changes in SG&A expenses.