Recovery in operating profit is lagging the consolidated revenue effect

FY2027-Q1 revenue was ¥61,822 million, an increase of ¥16,859 million from ¥44,963 million in the year-earlier period and up 37.5% year on year. However, operating profit was ¥383 million, down ¥49 million from ¥432 million in the year-earlier period. The operating margin calculated on a simple basis declined by approximately 0.34 percentage points, from approximately 0.96% to approximately 0.62%. The fact that the expansion in revenue has not translated directly into higher operating profit is the most important issue for the next results announcement.

Compared with the full-year plan, the company forecasts FY2027 revenue of ¥225,000 million and operating profit of ¥2,100 million. Revenue is planned to increase 21.1% from FY2026 actual revenue of ¥185,754 million, while operating profit is expected to decline 0.7% from ¥2,115 million and ordinary profit is expected to decline 0.9% to ¥3,000 million. In other words, the planned revenue growth includes an expansion of the consolidation scope through M&A and the addition of business areas, while the profit-margin assumptions remain cautious. In FY2027-H1, it will be necessary to check not only whether revenue approaches ¥112,500 million, equivalent to 50% of the full-year plan, but also whether operating profit exceeds ¥1,050 million, or 50% of the full-year plan.

FY2027-Q1 ordinary profit was ¥756 million and net profit attributable to owners of the parent was ¥904 million, representing year-on-year increases of 15.3% and 57.2%, respectively. However, quarterly net profit includes a ¥732 million gain on sales of investment securities, meaning that extraordinary income provided a substantial boost. Assessing only bottom-line profit while operating profit is declining could lead to an overestimation of earnings power from ordinary sales activities and cost management. In H1, the drivers of changes in operating profit, ordinary profit and net profit should be separated, and the continued growth in profit excluding extraordinary income should be verified.

The latest disclosure does not provide quarterly contribution amounts by reporting segment for profit, cost of sales, logistics expenses or personnel expenses. Accordingly, the publicly available figures do not allow the decline in the operating margin to be isolated between deterioration in the gross margin on housing materials sales, personnel expenses, goodwill amortization and integration costs associated with consolidating subsidiaries, or lost sales opportunities caused by material shortages and delivery delays. In FY2027-H1, we will track whether the company provides disclosure allowing at least the gross margin, changes in selling, general and administrative expenses, M&A-related costs, and the profit contributions of existing businesses and newly consolidated companies to be confirmed.