First-quarter profitability has not yet reversed the full-year earnings decline forecast

First-quarter net sales were ¥28.116 billion, up 5.2% year on year, while operating profit swung from a ¥53 million loss in the year-earlier quarter to a ¥500 million profit. Progress against the full-year forecasts was approximately 24.7% for net sales and 21.7% for operating profit. Net sales were broadly in line with the proportion of the year elapsed, while profit was slightly below that level.

The full-year forecasts remain net sales of ¥114.000 billion, operating profit of ¥2.300 billion, ordinary profit of ¥2.700 billion and net profit attributable to owners of the parent of ¥1.600 billion, with no revisions as of the first-quarter results. Assuming a simple 50:50 split between the first and second halves, ¥57.000 billion in net sales and ¥1.150 billion in operating profit by the end of the first half provide reference thresholds. Based on first-quarter results, reaching these thresholds would require standalone second-quarter net sales of ¥28.884 billion and operating profit of ¥650 million. These are analytical benchmarks back-calculated from the full-year forecasts, not the company's published first-half forecasts.

The first-quarter operating margin was approximately 1.78%, improving from approximately negative 0.20% in the year-earlier quarter. By comparison, the actual operating margin for FY2026 was 2.5%, while the operating margin implied by the FY2027 full-year forecast is only approximately 2.02%. In other words, the company has returned from a loss to profitability in the latest quarter, but its full-year plan assumes both higher net sales and lower operating profit.

At the next results announcement, it will be necessary to assess whether the benefits of price revisions in the paper and pulp manufacturing business, expanded domestic sales and lower fixed costs continued into the second quarter. It will also be important to determine whether higher raw material and fuel prices, wood costs and weaker export demand have again offset the first-quarter improvement, and whether the company maintains or revises its ¥2.300 billion full-year operating profit forecast. These will be the key indicators in assessing the first-half results.