First-quarter operating profit is ahead of plan, with profit progress running above the full-year target

In the first quarter of the fiscal year ending March 2027, revenue was ¥109.466 billion, up 6.2% year on year, while operating profit was ¥16.3 billion, up 34.4%. Ordinary profit was ¥18.849 billion, and net income attributable to owners of the parent was ¥12.711 billion, up 57.4% and 69.4%, respectively. Profit improvement therefore substantially outpaced revenue growth.

Operating profit progress against the ¥38.0 billion full-year forecast was 42.9%, well above the simple 25% quarterly elapsed rate. Revenue progress against the ¥405.0 billion full-year forecast was 27.0%, indicating that revenue was broadly on plan. The first-quarter operating margin was 14.9%, up approximately 3.1 percentage points from approximately 11.8% a year earlier. Accordingly, the focus this time is not simply whether revenue growth continues, but whether the margin improvement carries into the second quarter.

The company cited cost reductions through the ZΣ initiative, production innovation activities, progress on selling-price revisions, reductions in selling, general and administrative expenses, the weaker yen, and expanding demand for high-performance resins, battery materials and electronic materials as factors behind the profit increase. However, the contribution of each factor has not been disclosed. The company also referred to the Middle East situation, production in line with the volume of key raw materials procured, and control of spot export sales of general-purpose rubber. This indicates that the earnings upside was not driven solely by demand volumes.

At the next interim results, the first point to confirm is whether revenue and operating profit reach half of their full-year forecasts, or ¥202.5 billion and ¥19.0 billion, respectively. Starting from first-quarter operating profit of ¥16.3 billion, securing ¥2.7 billion in the second quarter alone would bring cumulative operating profit to ¥19.0 billion. If profit falls short of this level, it will be necessary to examine whether the first-quarter profit lead was temporary. It will also be important to determine whether the company can quantify the operating margin, the penetration of price revisions, reductions in selling, general and administrative expenses, and the effects of raw-material prices and foreign exchange.