Can the strong first-quarter progress turn a first-half beat into a full-year recovery?

FY2027-Q1 revenue was ¥42,098 million, up 15.2% year on year, operating profit was ¥5,810 million, up 149.4%, profit before tax was ¥5,870 million, up 107.2%, and profit for the quarter attributable to owners of the parent was ¥4,289 million, up 108.1%. The operating margin was approximately 13.8%, up approximately 7.4 percentage points from approximately 6.4% in the year-earlier quarter. Net cash provided by operating activities also increased to ¥7,502 million from ¥6,088 million in the year-earlier quarter.

First-quarter revenue represented approximately 24.3% of the full-year forecast of ¥173,000 million, broadly in line with the 25% share of the year elapsed. Operating profit, however, reached 52.8% of the full-year forecast of ¥11,000 million, with profit progress substantially outpacing revenue. The company attributed the increases in revenue and profit to higher sales of PGA resin products and household wrap, NEW KUREHA WRAP, as well as higher equity-method investment income, but has not disclosed product-level sales volumes, price effects or the amount of the increase in investment income.

According to reports dated 29 October, the first-half forecasts were revised to revenue of ¥87,000 million, operating profit of ¥10,500 million, profit before tax of ¥10,500 million and profit attributable to owners of the parent of ¥7,500 million. The forecast for first-half net income was raised by ¥2,500 million from the previous forecast of ¥5,000 million, implying a 19% year-on-year increase. A simple calculation of the difference from first-quarter results indicates that the second quarter would need to generate approximately ¥4,690 million in operating profit and ¥3,211 million in profit attributable to owners of the parent. Meeting the first-half forecast will therefore require maintaining a certain level of profit in the second quarter as well.

The full-year forecasts are revenue of ¥173,000 million, operating profit of ¥11,000 million, profit before tax of ¥10,500 million and profit attributable to owners of the parent of ¥7,500 million. At the next results announcement, the focus will be on whether the first-half beat leads to an upgrade of the full-year forecasts or whether the forecasts are conservatively maintained after factoring in investment costs in the second half, raw material prices and a recovery in PVDF profitability. Disclosure of standalone second-quarter operating profit, the profit composition of the Functional Products business and underlying profit excluding equity-method investment income will be particularly important.