Revenue rose, but operating margin fell sharply; pricing pass-through and SG&A expenses will be the key issues in FY2027-H1

FY2027-Q1 revenue was ¥2,539.197 million, exceeding the ¥2,456.748 million recorded in the year-earlier period, but operating profit declined by ¥40.347 million to ¥61.424 million from ¥101.771 million. The operating margin on revenue fell 1.7 percentage points from approximately 4.1% in the year-earlier period to approximately 2.4%, showing that higher revenue has not translated directly into higher profit. By segment, revenue was approximately ¥2,261.554 million in the Chemicals Business and approximately ¥277.642 million in the Home Products Business, with revenue growth in the Chemicals Business supporting the company-wide increase.

The deterioration in earnings was concentrated in the Chemicals Business. Segment profit in the Chemicals Business declined from ¥212.876 million in the year-earlier period to ¥185.350 million, while segment profit in the Home Products Business increased from ¥12.168 million to ¥14.381 million. The company explained that, in addition to being unable to fully offset the sharp rise in raw material costs through pricing pass-through, SG&A expenses increased due partly to higher depreciation and amortization associated with the system implementation. Depreciation and amortization in FY2027-Q1 was ¥83.322 million, and the next earnings release should clarify the increase attributable to the system implementation separately from regular depreciation of equipment.

Ordinary profit was ¥30 million, up 9.9% year on year, but this was attributable to factors including a ¥48 million reduction in production suspension costs from the year-earlier period, rather than an improvement in the core business. In FY2026-H1, operating profit was ¥104 million and ordinary loss was ¥16 million, making whether operating profit can exceed ¥104 million in FY2027-H1 a benchmark for determining whether the core business has recovered, rather than merely benefiting from non-operating factors. The amounts attributable to higher raw material prices, recovery through price revisions, the increase in SG&A expenses and production suspension costs have not been fully disclosed by factor, so it will be necessary to confirm in FY2027-H1 whether operating margin exceeds at least the 2.4% recorded in FY2027-Q1.