Can the return to profitability in the first quarter translate into the full-year profit plan?

First-quarter revenue for the fiscal year ending March 2027 was ¥11,127 million, up 5.7% year on year, while operating profit was ¥339 million, an improvement of ¥682 million from the operating loss of ¥343 million recorded in the same quarter of the previous year. Ordinary profit was ¥280 million, and profit attributable to owners of the parent was ¥126 million, putting operating, ordinary and net profit all in the black. The standalone first-quarter operating margin was approximately 3.0%, calculated by dividing ¥339 million by revenue of ¥11,127 million.

The company's full-year forecasts are revenue of ¥47,301 million, operating profit of ¥1,837 million, ordinary profit of ¥1,578 million and profit attributable to owners of the parent of ¥1,002 million. As of the first quarter, progress stood at 23.5% for revenue, 18.5% for operating profit, 17.7% for ordinary profit and 12.6% for net profit, indicating that profit was progressing somewhat more slowly than revenue. Assuming a simple even quarterly pattern, first-half revenue of approximately ¥23,650 million and operating profit of approximately ¥918 million would provide one reference point. However, quarterly fluctuations are substantial because of the timing of power plant repairs and operating conditions, so performance should not be assessed on seasonality alone; the drivers of profit need to be examined.

For FY2026, revenue was ¥45,291 million, operating profit was ¥1,272 million and the operating margin was 2.8%. The FY2027 full-year plan calls for the operating margin to rise to approximately 3.9%. However, this remains well below the medium- to long-term operating margin target of 10% that the company has maintained for years. The living environment and resource recycling businesses contributed to the first-quarter improvement, while the energy business remained loss-making. FY2027-H1 will be important in determining whether the improvement in company-wide profit can be replicated across multiple businesses or remains dependent on the normalisation of the resource recycling business.

At the next results announcement, the focus will be not only on first-half operating profit, but also on how much profit is being left for the second half in order to maintain the full-year forecast of ¥1,837 million, whether the improvement from stable power plant operations is continuing, and whether the losses in the energy business are being absorbed by higher profit in the living environment and resource recycling businesses. It would be premature to regard the first-quarter return to profitability as a sustainable earnings recovery. The first-half margin, segment profit and whether the full-year forecasts are revised will be important indicators.