FY2027-Q1 started with profit ahead of the first-half plan

FY2027-Q1 revenue was ¥826.157 billion, operating profit was ¥81.305 billion, and net income attributable to owners of the parent was ¥53.766 billion. Year on year, revenue increased 11.9%, operating profit increased 51.5%, and net income increased 172.7%. The operating margin improved to approximately 9.8%, from approximately 7.3% in the same period of the previous year, an improvement of approximately 2.6 percentage points. The full-year forecasts remain unchanged at revenue of ¥3,254.0 billion, operating profit of ¥248.0 billion, and net income of ¥160.0 billion.

The newly presented first-half forecasts are revenue of ¥1,686.0 billion, operating profit of ¥145.0 billion, ordinary profit of ¥149.0 billion, and net income of ¥89.0 billion. First-quarter progress against the first-half forecasts is approximately 49.0% for revenue, 56.1% for operating profit, and 60.4% for net income. On a simple calculation, the second quarter alone would need to generate revenue of ¥859.8 billion, operating profit of ¥63.7 billion, and net income of ¥35.2 billion. Although profit does not need to repeat the first quarter's high level, the key issue will be whether the company can expand revenue while maintaining its margin.

In the first-quarter presentation materials, the ¥27.7 billion increase in operating profit was attributed to a ¥11.0 billion foreign-exchange effect, a ¥11.0 billion market effect mainly in Materials, and an ¥8.1 billion contribution from higher sales and profitability, mainly in the focused growth businesses. Business transfers and the effect of newly consolidated companies were listed as a ¥2.5 billion negative factor. The second-quarter assumptions are for average exchange rates to decline from the first-quarter actuals of ¥160/USD and ¥185/EUR to ¥155/USD and ¥180/EUR, while the domestic naphtha price assumption declines from ¥118,900/kl to ¥95,000/kl. As the tailwind from foreign exchange weakens, the first-half results should show how much lower raw-material and fuel prices offset this through terms of trade and inventory timing differences.

The operating profit target under the Medium-Term Management Plan 2027 is ¥270.0 billion for fiscal 2027, with ¥380.0 billion envisioned for fiscal 2030. First-quarter operating profit of ¥81.3 billion represents approximately 32.8% progress against the full-year target of ¥248.0 billion, but achievement of the first-half forecast alone is not enough to conclude that the gap to the medium-term target has narrowed. In the second quarter, we will assess whether sales growth in the focused growth businesses is continuing even excluding temporary foreign-exchange and inventory effects, and whether the company's assessment of its full-year forecast changes.