Assessing first-half headline profit growth excluding foreign exchange and one-off factors

In the first half of FY2026, revenue was ¥1,463,963 million and operating profit was ¥144,143 million, up 7.7% and 56.2%, respectively, from the same period a year earlier. Looking only at operating profit, the company appears to have recovered rapidly from the impact of the cyberattack and system outage that occurred in 2025, but profit growth substantially outpacing revenue growth may reflect differences in the definitions of business profit and operating profit, as well as the effects of foreign exchange and asset sales.

Underlying business profit was ¥111,354 million, up just 1.5% year on year. Excluding foreign exchange movements, business profit fell 8.5% and revenue fell 0.6%, showing a gap between growth in yen-converted revenue and profit and the underlying strength of the business. If overseas sales in Europe and Asia Pacific were boosted by the weaker yen, reported profit growth could easily slow in Q3 if foreign exchange moves in the opposite direction.

The difference between first-half operating profit of ¥144,143 million and business profit of ¥111,354 million was ¥32,789 million. Determining whether this difference consists of gains on the sale of property, plant and equipment, business integration costs, impairment losses, amortisation of intangible assets or other items is important in assessing the sustainability of operating profit. In particular, because the company incurred substantial impairment losses and system outage-related impacts in 2025, the rebound from the low comparison base needs to be separated from ordinary underlying earnings power.

In the next earnings release, attention should be paid not only to nine-month operating profit but also to business profit, constant-currency revenue and business profit, and the items reconciling to operating profit. Whether constant-currency business profit at least narrows its first-half year-on-year decline of 8.5%, and whether business profit can continue to grow, will help determine whether the first half's substantial operating profit growth reflects underlying strength.