Q1 to test the FY2027 forecast for lower profit despite higher revenue

FY2026 results were revenue of ¥24.619 billion, up 3.8% year on year, operating profit of ¥2.118 billion, up 10.1%, ordinary profit of ¥2.217 billion, up 13.5%, and net income attributable to owners of the parent of ¥1.9 billion, up 5.3%. Operating margin was 8.6%. By contrast, the FY2027 forecast calls for revenue of ¥27.5 billion, operating profit of ¥1.8 billion, ordinary profit of ¥1.85 billion and net income of ¥1.285 billion. Revenue is planned to increase by ¥2.881 billion, while operating profit is expected to decline by ¥318 million. On a simple calculation, operating margin would be approximately 6.5%, around 2.1 percentage points below the previous year.

For FY2027, the company identifies higher raw-material, labor and logistics costs, as well as temporary cost increases associated with the expansion of regulated substances and supply constraints, as risks. In FY2026, stable raw-material prices, cost reductions from formulation improvements and price revisions contributed to a lower cost-of-sales ratio. For the coming year, the company assumes that these tailwinds will weaken and that revenue growth will not translate directly into profit growth. In Q1, it will be necessary to assess whether the benefits of price revisions and improvements in the raw-material cost ratio are continuing, or whether relatively fixed cost increases such as labor and logistics are taking the lead.

In FY2026-Q1, revenue was ¥6.006 billion and operating profit was ¥582 million. In the same quarter of the previous year, FY2025-Q1, revenue was ¥5.733 billion and operating profit was ¥426 million, so both revenue and operating profit improved in FY2026-Q1. In the next Q1, the initial benchmarks for assessing the validity of the full-year profit decline will be whether revenue increases year on year, whether operating profit exceeds ¥582 million and whether operating margin remains around 8.6%.

FY2026 also included approximately ¥512 million in extraordinary gains, including gains on sales of investment securities and shares of subsidiaries. As a result, the forecast decline in FY2027 net income is greater than the decline in operating profit. Accordingly, Q1 should focus not only on net income but also on operating profit, ordinary profit and the cost-of-sales ratio, to distinguish whether the full-year profit decline is caused by deterioration in core profitability or by the reversal of extraordinary gains and losses.