Q1 earnings are ahead of the full-year plan; FY2027-H1 will test whether this can be replicated

FY2027-Q1 revenue was ¥15,779 million, up 15.4% year on year, while operating profit was ¥742 million, up 34.7%. The operating margin was approximately 4.70%, up approximately 0.67 percentage points from approximately 4.03% in the same quarter of the previous year. Operating profit growth outpaced revenue growth, confirming that higher revenue was translating into profit improvement, at least as of Q1.

In Q1, the company announced its previously undetermined FY2027 full-year forecasts: revenue of ¥58,800 million, operating profit of ¥2,300 million, ordinary profit of ¥3,800 million and net income attributable to owners of the parent of ¥2,650 million. Q1 revenue progress was approximately 26.8% and operating profit progress approximately 32.3%, with operating profit progress exceeding revenue progress by approximately 5.5 percentage points. However, the seasonality of chemicals and coatings and fluctuations in second-half demand have not been quantified in the disclosed materials, so Q1 progress cannot be treated as a direct measure of the likelihood of achieving the full-year forecasts.

Compared with the previous year's actual results, the full-year forecasts call for revenue growth of 5.7% and operating profit growth of just 1.3%, while ordinary profit is expected to decline 9.7% and net income 15.4%. The company is therefore assuming modest growth in operating profit while taking a cautious view of non-operating income and expenses and profit after tax. In FY2027-H1, it will also be necessary to assess progress against the simple first-half lines of ¥1,900 million in ordinary profit and ¥1,325 million in net income, not only operating profit.

For shareholder returns, the FY2027 annual dividend forecast is ¥20. The FY2026 actual annual dividend was also ¥20, so this currently represents maintenance of the dividend level rather than an increase. The financial summary does not provide numerical policies for the payout ratio, DOE or total payout ratio. The next results will therefore need to be checked for whether revisions to the earnings plan are reflected in the dividend policy and whether the dividend forecast changes from ¥20.

For the next results, it is practical to use revenue of ¥29,400 million and operating profit of ¥1,150 million as the simple 50% first-half progress lines. Exceeding these levels would make it easier to conclude that Q1's front-loaded profit performance is continuing. If they are not reached, segment-level analysis will be needed to determine whether the negative factors identified in Q1, including weaker coating profitability, production adjustments by US users and weak demand for paints for new housing, have intensified in the first half.