First-quarter cost absorption despite higher revenue but lower operating profit

First-quarter revenue was ¥161,160 million, up 1.8% from ¥158,233 million in the same period of the previous year. Operating profit, however, fell 28.7% to ¥1,495 million from ¥2,098 million. The operating margin declined by approximately 0.4 percentage points, from approximately 1.33% in the same period of the previous year to approximately 0.93% in the current period, indicating that higher revenue has not translated directly into profit growth.

The company explained that the penetration of price revisions in its paper and paperboard business and domestic home and personal care business, together with fixed-cost reductions from structural reforms, contributed to higher profit. By contrast, higher prices for raw materials and fuel, including wood chips and chemicals, as well as higher logistics costs, reduced profit. The amounts of the profit increase from price revisions, the profit decrease from higher raw material and fuel prices, and the increase in logistics costs have not been disclosed separately, so the scale of the margin decline cannot currently be examined by factor.

The full-year operating profit forecast is ¥24,000 million, essentially unchanged from the previous year's actual result of ¥24,032 million. The first-quarter progress rate was only 6.2%, below a simple even quarterly run rate, making it important to see how much of the cost deterioration was recovered through price revisions in the first six months. In the next results, we will look for year-on-year operating profit, the operating margin, and the contributions of price, volume and costs in both the paper and paperboard and home and personal care businesses.