Profit improves despite lower revenue, but full-year operating profit progress remains low

Consolidated first-quarter revenue was ¥48,705 million, down ¥2,217 million from ¥50,922 million in the same quarter of the prior year, while operating profit rose to ¥1,528 million from ¥1,415 million. The operating margin was approximately 3.1% on a simple calculation, improving from approximately 2.8% a year earlier. Since profit increased as revenue contracted, it will be important to determine how far price revisions and changes in the business mix offset the effects of lower volumes and changes in the scope of consolidation.

The full-year plan calls for revenue of ¥220,500 million and operating profit of ¥12,700 million, representing expected declines of 1.6% in revenue and growth of 11.6% in operating profit from the prior-year results. Against the prior-year operating margin of 5.1%, the current-year plan implies approximately 5.8%, making margin improvement rather than revenue growth essential to achieving the full-year plan. At the end of Q1, progress was 22.1% for revenue versus 12.0% for operating profit. Based on 25% of the year having elapsed, it is difficult to say that profit is ahead of schedule.

Assuming the quarters are simply even, the mechanical first-half benchmarks are revenue of ¥110,250 million and operating profit of ¥6,350 million. Working back from the first-quarter results, the second quarter alone would need to generate revenue of ¥61,545 million and operating profit of ¥4,822 million, although these are reference figures that do not account for seasonality. At the next results announcement, it will be necessary to check whether the company maintains its full-year operating profit forecast of ¥12,700 million or revises it based on first-half progress.

The corrugated packaging business was the main source of profit, with first-quarter revenue of ¥33,101 million and operating profit of ¥3,046 million, up 5.4% and 15.2%, respectively, year on year. The company explained the effects of sales volumes for processed foods and fresh produce, price revisions and foreign exchange, but did not disclose the contribution or sales volume by factor. In the first half, the key test will be whether the corrugated packaging business can continue to increase profit and lift consolidated operating profit progress by absorbing losses in housing and lower revenue in transport and warehousing.