FY2027-H1 is running ahead on operating profit, but the figures imply a decline in margin in 2Q.

In 1Q, from April to June 2026, net sales were ¥41.771 billion, down 0.8% year on year, and operating profit was ¥2.676 billion, down 1.4%. Ordinary profit, however, rose 5.2% to ¥3.021 billion, while net profit attributable to owners of the parent rose 16.2% to ¥2.320 billion. The company’s FY2027-H1 forecast is net sales of ¥83.7 billion, operating profit of ¥4.7 billion, ordinary profit of ¥5.1 billion and net profit of ¥4.1 billion.

Comparing 1Q results with the H1 forecast on a simple basis gives progress rates of 49.9% for net sales, 56.9% for operating profit, 59.2% for ordinary profit and 56.6% for net profit. At the halfway point of the H1 period, net sales are progressing broadly evenly, while profit is ahead. However, subsidies and foreign exchange gains contributed to the increases in ordinary profit and net profit in 1Q, making operating profit the key measure for assessing the underlying performance of the business.

Subtracting 1Q results from the H1 forecast implies required 2Q net sales of ¥41.929 billion and operating profit of ¥2.024 billion. This equates to a standalone 2Q operating margin of approximately 4.8%, below the approximately 6.4% recorded in 1Q. The figure is not a standalone 2Q forecast disclosed by the company, but a mechanical calculation based on the cumulative forecast and 1Q results, so it includes seasonality and one-off factors. At the H1 results, however, it will be important to determine whether the gap arose from higher raw material prices, lower revenue in Mexico or cost improvements.

The full-year forecast is net sales of ¥167.1 billion, operating profit of ¥8.8 billion, ordinary profit of ¥9.1 billion and net profit of ¥10.0 billion. Based on 1Q results, full-year progress is 25.0% for net sales and 30.4% for operating profit, indicating that operating profit alone is running ahead of the annual plan. Although the 1Q earnings summary confirms that the earnings forecast was revised, it does not disclose the amounts attributable to each factor before and after the revision, the H1 forecast by segment or the standalone 2Q profit plan. At the next results announcement, it will be necessary to assess not only the likelihood of achieving ¥4.7 billion in operating profit, but also whether higher raw material costs were passed on through pricing, whether product sales in Mexico have bottomed out and whether the benefits of cost improvements continued into 2Q.