Will the sharp improvement in operating profit in 1Q continue into FY2027-H1?

Revenue in 1Q of the fiscal year ending March 2027 was ¥15,662 million, up 3.5% year on year, while operating profit was ¥1,153 million, up 44.6%. Ordinary profit was ¥2,335 million, up 60.5%, and net profit attributable to owners of the parent was ¥1,819 million, up 57.0%, meaning that profit growth outpaced revenue growth. Progress against the full-year forecast was 23.6% for revenue and 28.5% for operating profit, with operating profit ahead of revenue by 4.9 percentage points.

By comparison, revenue for the previous fiscal year was ¥61,889 million and operating profit was ¥4,004 million, for an operating margin of 6.5%. The company's full-year forecast for the fiscal year ending March 2027 is revenue of ¥66,400 million and operating profit of ¥4,050 million, implying that operating profit growth is being held to 1.1% against revenue growth of 7.3%. Accordingly, the approximately 7.4% operating margin calculated for 1Q cannot be assumed as the full-year basis, and the possibility that margins will normalize in the second half also needs to be examined.

Revenue in the first half of the previous fiscal year was ¥30,300 million and operating profit was ¥1,640 million. In the next FY2027-H1 results announcement, the key benchmark for determining whether the 1Q improvement was temporary will be whether cumulative 2Q revenue exceeds the same period of the previous fiscal year and operating profit exceeds ¥1,640 million. In particular, if operating margin falls below 7% despite higher revenue, the possibility remains that the 1Q profit improvement depended on volume or temporary profitability factors.

The company attributed the 1Q profit increase to higher sales volume and improved profitability, but it has not disclosed the contribution of volume, pricing and procurement effects. In the next results announcement, we will look at cumulative segment profit for 2Q, as well as how much of the remaining ¥2,897 million needed to meet the full-year operating profit forecast of ¥4,050 million was secured and whether the full-year forecast was revised.