Q1 revenue rose, but operating profit fell; cost absorption is the key issue for FY2027-H1

Revenue in the first quarter of the fiscal year ending March 2027 was ¥10,857 million (¥10,857 million, up 1.0% year on year), but operating profit was ¥825 million (¥825 million, down 21.0%), ordinary profit was ¥840 million (¥840 million, down 21.2%), and net profit attributable to owners of the parent was ¥593 million (¥593 million, down 20.1%). The operating margin also fell 2.1 percentage points from approximately 9.7% in the year-earlier period to 7.6%, indicating that higher revenue did not translate into higher profit.

The earnings presentation's bridge of changes in operating profit shows that higher revenue contributed only ¥110 million, while higher cost of sales reduced profit by ¥250 million, higher distribution freight costs by ¥50 million, and higher other expenses by ¥50 million. The breakdown of the increase in cost of sales comprises ¥100 million in manufacturing fixed costs, ¥60 million in manufacturing labor costs, ¥80 million in raw material costs and ¥10 million in energy costs. This confirms the scale of cost pressure across manufacturing, procurement and logistics, rather than simply insufficient sales volume.

In the previous fiscal year, the fiscal year ended March 2026, revenue was ¥41,061 million, operating profit was ¥3,768 million and the operating margin was 9.2%. By contrast, the company's FY2027 forecast is revenue of ¥43,400 million and operating profit of ¥3,700 million. Revenue is expected to rise 5.7%, while operating profit is expected to decline 1.8%, implying an operating margin of approximately 8.5%. Although the company expects revenue growth, it projects flat or lower profit, so the first half will be important in determining whether Q1's margin decline was temporary or structural and already incorporated into the full-year plan.

The basic comparison for FY2027-H1 is with year-earlier revenue of ¥22,832 million, operating profit of ¥2,756 million and ordinary profit of ¥2,827 million. In particular, it will be important to assess how much the price revision for deliveries from 1 October contributed to selling prices and operating profit, whether the price revision caused a decline in volume, and whether increases in manufacturing fixed costs and labor costs slowed from Q1. In addition to maintaining the full-year operating profit forecast of ¥3,700 million, whether the margin is trending upward from Q1's 7.6% will affect confidence in the company's plan.