After completing the steel systems refresh, the key question for FY2027-H1 is whether new projects can fill the revenue shortfall

Consolidated revenue for FY2027 1Q was ¥12,742 million, down ¥2,069 million, or 14.0%, year on year. Operating profit was ¥802 million, down 51.5%; ordinary profit was ¥884 million, down 47.5%; and net profit attributable to owners of the parent was ¥519 million, down 52.7%. The main reason for the decline in revenue and profit was the completion of the Steel Division's steelworks systems refresh project, which reduced the amount of work compared with the same quarter of the previous year.

By business, Steel Division revenue in 1Q was ¥3,892 million, down 42.2% year on year. Steel business revenue in FY2026 was also ¥21,993 million, down 27.5% year on year, indicating that the end of the refresh projects has reduced revenue across fiscal years. At the same time, the company has indicated that new steel projects after completion of the refresh will contribute to revenue growth, so the first-half results need to distinguish between the decline from the end of existing large projects and the ramp-up of new projects.

Excluding Steel Division revenue of ¥21,993 million from FY2026 consolidated revenue of ¥57,411 million leaves approximately ¥35,418 million for businesses outside steel. In 1Q as well, revenue increased in key areas, including Digital Manufacturing at ¥566 million, ERP Solutions at ¥945 million and Infrastructure at ¥2,443 million. Accordingly, the current revenue decline appears to center on completion of a major steel project and a change in business mix, rather than a uniform deterioration in company-wide demand. However, it remains to be determined whether revenue growth outside steel can structurally absorb the decline from the completed project.

The full-year forecasts remain unchanged at revenue of ¥60,000 million and operating profit of ¥6,600 million. At the 1Q stage, revenue progress was approximately 21.2% and operating profit progress approximately 12.2%. Even allowing for the second-half weighting in the seasonal pattern, the first-half results should provide specific confirmation of the scale of the steel business decline, orders and project starts for new projects, and the continuation of revenue growth in key businesses. It will also be important to confirm whether the amounts shown in the earnings presentation's bridge reconcile with the decline in consolidated revenue, and whether the company will provide more detailed disclosure bridging the steel and other businesses.