Revenue is growing, but profit is tracking below plan; absorbing cost pressure is the key FY2027 H1 issue

First-quarter revenue was ¥10,728 million, up ¥531 million, or 5.2%, from ¥10,197 million a year earlier. Operating profit, however, fell 16.7% year on year to ¥667 million, ordinary profit fell 21.3% to ¥640 million, and profit attributable to owners of the parent fell 25.8% to ¥445 million. This is a clear margin squeeze, with profit declining despite revenue growth.

The full-year forecasts remain unchanged at revenue of ¥42,000 million, operating profit of ¥3,070 million, ordinary profit of ¥2,900 million and net profit of ¥2,070 million. First-quarter progress was 25.5% for revenue, versus 21.7% for operating profit, 22.1% for ordinary profit and 21.5% for net profit, indicating that profit is lagging revenue. Without adjusting for simple seasonality, ¥21.0 billion of revenue and ¥1.535 billion of operating profit by the end of the first half provide reference checkpoints. These are mechanically calculated tracking benchmarks based on the full-year forecasts, not half-year targets provided by the company.

Supplementary materials show first-quarter cost of sales of ¥6,650 million and selling, general and administrative expenses of ¥3,410 million. Cost of sales was approximately 62.0% of revenue on a simple calculation, but the company has not formally disclosed quarterly gross or operating margins. Changes in the sales mix, higher raw-material prices, increased logistics costs and higher one-off expenses were cited as factors behind the decline in profit, but their individual contributions were not quantified. First-quarter R&D expenses were ¥926 million, representing 25.7% of the full-year forecast of ¥3,600 million.

The cost-of-sales ratio rose 2.1 percentage points to 61.4% in the previous fiscal year, while the operating margin declined from 7.4% to 7.0%. The full-year operating profit forecast of ¥3,070 million is only 5.2% above the previous year's actual result of ¥2,919 million, so revenue growth alone will not be enough to meet the plan. Through the second quarter, it will be necessary to assess whether higher raw-material and logistics costs are temporary, whether they can be absorbed through the product portfolio and price revisions, and whether increases in R&D expenses and depreciation continue.