Revenue and ordinary profit rose, but operating profit and net income declined, making profit recovery in the second half the focus

Revenue in the FY2026 interim period was ¥3,446 million, up 2.8% year on year, while ordinary profit was ¥251 million, up 6.4%. Operating profit, however, was ¥209 million, down 4.0%, and interim net income attributable to owners of the parent was ¥173 million, down 13.7%. Because the increase in revenue did not translate directly into higher operating profit, and the operating margin declined from approximately 6.5% in the same period last year to approximately 6.1%, the quality of revenue growth and the company’s ability to absorb costs need to be assessed separately.

The difference at each profit level was attributable to equity-method investment gains and gains on sales recorded in the same period last year. At the operating level, higher administrative costs at the Chinese subsidiary due to the weaker yen and higher construction costs resulting from increased raw-material prices and subcontracting rates weighed on earnings. Ordinary profit increased, however, due to the recognition of equity-method investment gains. Net income declined to ¥173 million because gains on sales of investment securities and investments in affiliates recorded in the same period last year did not recur. In the third quarter, it will be important to determine whether operating profit improves without relying on equity-method investment gains and losses or extraordinary gains and losses.

The full-year forecasts are ¥7,215 million in revenue, ¥527 million in operating profit, ¥671 million in ordinary profit and ¥485 million in net income. At the end of the interim period, progress was limited to 47.8% for revenue, 39.7% for operating profit, 37.4% for ordinary profit and 35.7% for net income. Using a simple 75% progress benchmark, the cumulative nine-month figures of ¥5,411 million in revenue, ¥395 million in operating profit, ¥503 million in ordinary profit and ¥364 million in net income provide one reference line. For the third quarter alone, the company would need approximately ¥1,965 million in revenue, ¥186 million in operating profit, ¥252 million in ordinary profit and ¥191 million in net income.

On the cash-flow side, cash flow from operating activities was positive at ¥114 million in the interim period, but declined from ¥200 million in the same period last year. Cash flow from investing activities was negative ¥295 million, and cash flow from financing activities was negative ¥688 million, leaving cash and cash equivalents at ¥1,491 million. In the third quarter, the key issues will include not only profit progress but also whether operating cash flow follows reported profit and whether the decline in cash balances continues.