1Q operating profit is ahead of plan; FY2027-H1 will test the sustainability of the full-year forecast

In 1Q of FY2027, net sales were ¥7,274 million, up 2.3% year on year, and operating profit was ¥984 million, up 30.2%. The full-year forecasts are ¥29,700 million in net sales and ¥3,300 million in operating profit, resulting in 1Q progress rates of 24.5% and 29.8%, respectively. Net sales were almost in line with the simple 25% share of the fiscal year elapsed, while operating profit was 5.3 percentage points ahead.

Compared with the previous fiscal year, the company expects net sales to increase 4.4% this fiscal year from ¥28,443 million in FY2026, while forecasting operating profit to decline 7.1% from ¥3,554 million. Accordingly, rather than viewing the 1Q profit increase as grounds for mechanically raising the full-year plan, it should be seen as an early performance upside against a conservative profit plan that incorporates higher costs. No revision to the latest earnings forecasts was made with the 1Q results, making the key issue whether these assumptions will hold in H1.

The increase in 1Q profit reflected strong sales of functional materials for health-function products, in Southeast Asia, collagen, and ODM and product-development consulting, as well as a rebound from the operating suspension at the Thai subsidiary for equipment upgrades in the same quarter of the previous year. Sales volumes of saccharides also increased on inbound demand, stable weather and event activity, but the company simultaneously cited lower selling prices following product price cuts and higher raw-material and logistics costs. Since the Thai subsidiary’s rebound may not continue beyond H1, it is necessary to assess not only whether cumulative 2Q operating profit exceeds the simple interim benchmark of ¥1,650 million, but also how much profit growth remains after excluding the rebound effect.

The 1Q disclosure provided no H1 earnings forecast figures or amounts attributable to sales volume, prices or costs. Nor did the company prepare a quarterly consolidated cash flow statement for 1Q. In the next results, cumulative 2Q net sales and operating profit, progress against the full-year forecasts, contributions from functional materials and saccharides, and any revisions to the earnings forecasts should be reviewed together to determine whether 1Q’s profit lead was driven by seasonality or the temporary rebound from the operating suspension.