Q1 losses narrowed, but FY2027-H1 earnings remain below the pace needed to meet the full-year targets

FY2027-Q1 revenue was ¥6,119 million, down 3.6% from ¥6,347 million in the year-earlier quarter. The company posted an operating loss of ¥209 million, an improvement of ¥162 million from the ¥371 million loss in the prior-year quarter. The ordinary loss was also limited to ¥108 million, narrowing from ¥252 million a year earlier. However, net income attributable to owners of the parent was a ¥74 million loss, compared with a ¥704 million profit in the year-earlier period, marking a return to the red.

The full-year forecasts are revenue of ¥40,300 million, operating profit of ¥3,620 million, ordinary profit of ¥3,720 million and net income attributable to owners of the parent of ¥2,516 million. Q1 revenue progress was only about 15.2%, below the 25% implied by simple quarterly apportionment. Reaching the full-year revenue forecast requires ¥34,181 million in revenue from Q2 onward. Assuming the Q1 operating loss of ¥209 million, the company must generate ¥3,829 million in operating profit over the remaining period. Seasonality and variations in construction progress need to be taken into account, but the extent of the recovery by H1 will be an important indicator of the achievability of the full-year targets.

The deterioration in final profit was attributed mainly to the absence in Q1 of gains on share sales recorded in the prior-year quarter. The prior-year quarter included ¥1,284 million in gains on sales of investment securities, whereas no comparable gain was recorded in the current period, so the narrower operating loss did not flow through to final earnings. The Q1 earnings summary does not provide sufficient detail on the breakdown or amount of extraordinary gains and losses for the current period. In FY2027-H1, it will therefore be necessary to check whether gains on sales of investment securities were recorded, how profit before tax was reconciled to net income, and the amounts of non-recurring items.

By segment, Q1 revenue comprised ¥2,510 million from the Heat Treatment business, ¥3,045 million from the Plant business and ¥176 million from the Development business. Operating results were losses of ¥422 million, a profit of ¥371 million and a loss of ¥163 million, respectively. Profit from the Plant business supported the reduction in the company-wide loss, while the Heat Treatment and Development businesses remained in the red. In H1, it will be important to determine whether Plant business profits continue and whether the Heat Treatment business recovers revenue while the Development business narrows its loss.