FY2027 Q1: Revenue rose, but operating profit plunged as cost-driven earnings pressure continued

Consolidated revenue for the first quarter of the fiscal year ending March 2027 was ¥6,337 million, up 2.0% from ¥6,214 million in the year-earlier quarter. Operating profit, however, fell 61.9% to ¥179 million from ¥471 million, while the operating margin on revenue declined by approximately 4.8 percentage points, from approximately 7.6% to approximately 2.8%. Since revenue has been maintained, the focus in the next interim results will be the company’s ability to absorb costs such as raw materials, labor and energy, rather than a lack of demand.

By segment, Food revenue increased just 0.4% to ¥5,223 million, while segment profit fell 58.7% to ¥178 million. Chemicals revenue rose 4.8% to ¥993 million, but profit declined 4.2% to ¥267 million. Real estate performed strongly, with revenue up 83.5% to ¥119 million and profit up 170.5% to ¥58 million. Real estate offset part of the profit declines in Food and Chemicals, but the profitability of the two core businesses has yet to recover.

The company attributed the decline in operating profit to a higher cost-of-sales ratio caused by persistently high prices for key raw materials, higher labor costs, and increased labor and energy costs in the Chemicals business. However, the first-quarter disclosure does not provide the increase by expense category, a volume-price-cost breakdown, or the Food business’s gross margin. Nor has a quarterly consolidated cash flow statement been prepared, so it will be necessary to check in the next results whether the deterioration in profit was accompanied by higher working capital or inventories.

Food segment profit was ¥1,191 million in FY2026 H1. Since Food profit was only ¥178 million in FY2027 Q1, more than ¥1,013 million of profit would be required in Q2 alone to maintain the year-earlier level. In the interim results, the key points will be whether the benefits of price revisions in Food exceed increases in raw-material and labor costs, whether Chemicals margins improve, and whether the higher real estate profit represents more than a temporary contribution from land rental income.