Revenue and earnings rose, but the operating margin declined, putting the quality of profit growth under scrutiny

In the first half of the fiscal year ending December 2026, revenue was ¥9,596 million, up 22.7% year on year; operating profit was ¥581 million, up 14.1%; ordinary profit was ¥584 million, up 14.9%; and interim net income attributable to owners of the parent was ¥495 million, up 40.3%. Both revenue and operating profit increased, indicating robust revenue and earnings growth on the surface.

However, the operating margin was approximately 6.1% in the first half, down approximately 0.4 percentage points from approximately 6.5% in the same period of the previous year. Operating profit growth of 14.1% lagged revenue growth of 22.7%, so the increase in revenue did not translate directly into an improved margin. In the nine months ended the third quarter, it will be necessary to confirm whether the operating margin can remain at or above 6.1% while maintaining revenue growth, and whether further increases in raw material, logistics and SG&A expenses are putting additional pressure on profit.

The change in first-half operating profit is explained by a ¥3 million increase in profit from the industrial business, a ¥22 million decline in profit from the commercial business, a ¥134 million increase in profit from the household business, and a ¥43 million decline in profit from corporate and other operations. While growth in the household business provided substantial support for overall earnings growth, the commercial business and corporate and other operations together had a negative impact of ¥65 million, indicating a high concentration of profit growth. The next results should be assessed not only for whether strong growth in the household business continues, but also for whether the decline in commercial-business profit is temporary and whether fixed-cost and selling-expense burdens are improving.

The 40.3% increase in interim net income attributable to owners of the parent, which exceeded operating profit growth, included items outside operating profit, such as the ¥21 million gain on the sale of investment securities. Depreciation and amortization in the first half was ¥234 million, and the fixed-cost burden following capital investment remains. The next results should provide important disclosure on whether operating profit growth is driven by core revenue, gross profit and expense management, or by temporary factors such as extraordinary gains and financial income and expenses.