Flat sales, while 9M operating profit fell 22.0%, putting pressure on margins

9M sales were ¥4,810 million, up just 0.1% from approximately ¥4,805 million in the prior-year period. Operating profit was ¥153 million, down 22.0% from ¥196 million, ordinary profit was ¥141 million, down 24.9%, and net income attributable to owners of the parent was ¥56 million, down 51.8%. With sales remaining almost unchanged, only profit has contracted. The central issue is therefore deterioration in margins and the cost structure, rather than simply insufficient demand.

The Company has maintained its full-year forecasts of ¥6,600 million in sales, ¥260 million in operating profit, ¥250 million in ordinary profit and ¥130 million in net income. On this basis, the fourth quarter requires sales of ¥1,790 million, operating profit of ¥107 million, ordinary profit of ¥109 million and net income of ¥74 million. The fourth-quarter operating margin would need to be approximately 6.0%, well above the approximately 3.2% recorded through 9M. It is necessary to determine whether the decline in margins through 9M can be explained by temporary cost factors and whether there is a basis for recovery in the fourth quarter.

FY2025 full-year operating profit was ¥234 million, compared with ¥196 million through the third quarter, implying fourth-quarter operating profit of approximately ¥38 million in the prior year. FY2026 requires ¥107 million, or approximately 2.8 times the prior-year fourth-quarter level, to be generated in a short period. Sales also need to reach ¥1,790 million, versus approximately ¥1,560 million in the prior-year fourth quarter, requiring growth of approximately 15%.

The Company has cited higher SG&A expenses, mainly personnel costs, as a reason for the decline in 9M profit. At the interim period, SG&A expenses were ¥1,144.120 million, ¥22.906 million above ¥1,121.214 million in the prior-year period, while salaries and allowances were ¥683.396 million, up ¥11.297 million from ¥672.099 million. In the next results release, the Company needs to provide enough disclosure to assess whether fourth-quarter profit recovery will come from higher sales or cost controls, including the full-year changes in SG&A expenses, salaries and bonuses, and gross profit on an absolute-value basis.