For FY2027, the pace of recovery in the first half will be the focus as the company targets ¥6,000 million in operating profit.

FY2027-Q1 revenue was ¥38,620 million, down 2.1% from ¥39,461 million in the same period a year earlier. Progress against the full-year revenue forecast of ¥175,000 million was 22.1%. Compared with the simple first-half benchmark of ¥87,500 million, which does not account for quarterly seasonality, revenue of at least ¥48,880 million will need to be added in the second half of the first half. This is not a company-provided half-year forecast, but a mechanical benchmark for assessing progress against the plan at the next results announcement.

Operating profit was ¥393 million, an improvement of ¥1,614 million from the ¥1,221 million operating loss recorded in the same period a year earlier. However, progress against the full-year operating profit forecast of ¥6,000 million was 6.6%, well below the 22.1% progress in revenue. Assuming that half of the full-year forecast, or ¥3,000 million, is earned in the first half, Q2 alone would need to generate operating profit of ¥2,607 million. The extent to which the benefits of structural reform are reflected in Q2 profit will therefore be important.

Q1 operating profit by segment was ¥832 million for Functional Products, an operating loss of ¥453 million for Paper Materials, and ¥27 million for Engineering. Revenue was ¥18,562 million for Functional Products, ¥20,399 million for Paper Materials and ¥838 million for Engineering, showing that the recovery in operating profit has not been uniform across the company. If Paper Materials remains loss-making on a cumulative first-half basis, the burden on profitable businesses such as Functional Products to achieve full-year operating profit of ¥6,000 million will increase.

In the next FY2027-H1 results, we will compare progress in revenue and operating profit against the full-year forecasts with the year-earlier period, and assess whether the improvement in Q2 standalone profit came from cost reductions in the Germany business, a reduction in losses in Paper Materials or a recovery in demand for Functional Products. As of Q1, the full-year forecasts had not been revised. The first assessment point will be whether the plan can be maintained at the half-year results or whether the assumptions underlying the profit plan have changed.