Profit growth leads on pricing adjustments and cost reductions, with balancing lower volumes the key focus

In the first quarter of the fiscal year ending March 2027, revenue increased ¥120 million, or 2.5%, to ¥4,900 million from ¥4,780 million in the same quarter of the previous year. Operating profit, by contrast, rose ¥278 million, or 82.3%, from ¥337 million to ¥615 million, while the operating margin improved by 5.5 percentage points, from approximately 7.1% to 12.6%. This was a set of results in which improvements in selling prices and costs lifted profit more than revenue growth did, making the sustainability of the margin the most important issue for the next results announcement.

The company’s breakdown of factors driving changes in ordinary profit showed a ¥180 million negative volume variance, offset by a ¥300 million positive selling-price variance, a ¥110 million positive cost-unit variance, a ¥50 million positive SG&A variance and a ¥30 million positive variance in other items. In total, these factors represented approximately ¥310 million in improvement, and ordinary profit increased 94.0% from ¥331 million in the same quarter of the previous year to ¥642 million. Although volumes declined because of shrinking demand and the withdrawal from certain transactions as part of a focus on selected businesses, the decline was offset by price revisions, optimization of electrolytic operations, and reductions in manufacturing costs and SG&A.

The full-year forecasts remain unchanged at revenue of ¥21,700 million, operating profit of ¥2,300 million, ordinary profit of ¥2,340 million and profit attributable to owners of the parent of ¥1,260 million. First-quarter progress rates were 22.5% for revenue, 26.7% for operating profit, 27.4% for ordinary profit and 36.1% for net profit. The company itself assessed revenue progress as below average, while profit progress was above average. In FY2027-H1, it will be necessary to assess whether operating profit approaches 50% of the full-year forecast and whether profit growth ahead of revenue, without accompanying revenue growth, is a temporary phenomenon.

The company has not disclosed a product-by-product breakdown of the amount of its price revisions, sales volumes or unit prices in the Chemicals business, or the full-year assumptions for raw-material prices and foreign exchange. It also did not prepare a quarterly statement of cash flows for the first quarter, so it has not been confirmed whether the improvement in profit is accompanied by working-capital generation and cash flow. At the next results announcement, the continuing effects of price revisions, a narrowing decline in volumes, and the maintenance of the cost-unit variance should be reviewed together with improvement in operating cash flow.