Profit is tracking ahead despite the sales shortfall; sustainability of the earnings improvement to be assessed in FY2027-H1

Revenue in the first quarter of the fiscal year ending March 2027 was ¥159,299 million, down 16.1% year on year. Operating profit was ¥12,355 million, ordinary profit was ¥21,378 million, and net profit attributable to owners of the parent was ¥11,617 million, with operating profit up 56.4% year on year. With operating profit increasing despite lower revenue, the improvement in profitability is the central change in these results.

The first-quarter operating margin on revenue was approximately 7.8%, calculated as ¥12,355 million divided by ¥159,299 million. The FY2026 full-year operating margin on revenue was approximately 4.7%, calculated as ¥35,399 million divided by ¥745,280 million, so the latest margin is approximately 3 percentage points above the full-year result. However, the first-quarter figures are cumulative, and quarterly profit recognition can fluctuate significantly depending on project progress and completion timing.

The unchanged full-year forecasts are revenue of ¥670,000 million, operating profit of ¥40,000 million, ordinary profit of ¥46,000 million, and net profit attributable to owners of the parent of ¥46,000 million. The simple progress rates are approximately 23.8% for revenue and 30.9% for operating profit, meaning profit is approximately 7 percentage points ahead of revenue. For the interim period, revenue of ¥335,000 million and operating profit of ¥20,000 million, representing half of the full-year targets, should be used as mechanical benchmarks to assess whether the plan is weighted toward the first half or dependent on second-half profit.

The gap between ordinary profit of ¥21,378 million and operating profit of ¥12,355 million is ¥9,023 million. As this may include the effects of non-operating income and expenses and foreign exchange, the interim results should distinguish whether the improvement in operating profit came from project profitability or non-operating factors. If the operating margin remains at 6% or higher and operating profit approaches 50% of the full-year forecast, this would strengthen the view that the improvement in profitability since FY2026 is continuing.