Revenue growth despite lower margins; FY2026-Q3 focus is evidence of earnings recovery

FY2026-H1 consolidated revenue was ¥1,874.945 million, up 12.3% from ¥1,669.782 million a year earlier. However, operating profit was ¥83.734 million, below the ¥91.636 million recorded in the same period of the previous year, representing an 8.6% decline. Based on a simple calculation, the operating margin fell approximately 1.0 percentage point, from approximately 5.5% to approximately 4.5%. The fact that higher revenue has not translated directly into higher earnings is the most important point to verify in FY2026-Q3.

By segment, the Electronics business posted revenue of ¥1,261.485 million and operating profit of ¥102.425 million. Revenue rose 21.0% year on year, but operating profit increased only 0.9%. The Marine and Environmental Equipment business reported revenue of ¥208.402 million and operating profit of ¥19.836 million, with revenue up 31.4% and operating profit up 40.9%, representing relatively stronger earnings improvement. The SI business generated revenue of ¥380.889 million and operating profit of ¥65.055 million, achieving higher profit despite lower revenue. The Science business, meanwhile, posted revenue of ¥24.167 million and an operating loss of ¥18.326 million, weighing on company-wide earnings.

The company attributed the main changes to project acceptance in the Electronics business, sales of marine equipment from orders received in previous fiscal years in the Marine and Environmental Equipment business, and cost reductions in the SI business. However, it has not disclosed the contribution from individual accepted projects, the amount of cost reductions, or changes in margins on imported products. It has also not disclosed its full-year earnings forecast, stating that material fluctuations in the delivery timing of large projects make a reasonable calculation difficult. Accordingly, in Q3 it will be important to determine whether gross profit and operating profit by segment are improving, rather than looking only at revenue.

At the next earnings announcement, we will assess the extent to which operating profit in the Electronics business increases relative to revenue growth, whether acceptance of large projects in the Marine and Environmental Equipment business is proceeding as planned, and whether the SI business’s higher profit reflects temporary cost reductions. We will also examine whether the Science business’s operating loss narrows from ¥18.326 million and whether operating profit recovers without relying on foreign-exchange gains or one-off non-operating income.