Q1 revenue growth but lower operating profit: converting sales growth into profit is the top checkpoint for FY2027-H1

FY2027-Q1 revenue was ¥9,893 million, up ¥755 million from ¥9,137 million in the same quarter of the previous year. Operating profit, however, fell by ¥69 million, from ¥1,253 million to ¥1,184 million, and the operating margin declined by approximately 1.8 percentage points, from approximately 13.7% to approximately 12.0%. Revenue growth has not flowed through directly to operating profit, making the quality of revenue growth and the movement in contribution margin the most important issues in the H1 results.

The full-year forecast is revenue of ¥43,000 million, operating profit of ¥4,700 million, ordinary profit of ¥4,800 million and net profit attributable to owners of the parent of ¥2,400 million. As of Q1, progress was 23.0% for revenue, 25.2% for operating profit, 26.5% for ordinary profit and 28.8% for net profit, and the company considers profit at each stage to be progressing steadily. However, using a simple half-year split as a reference, H1 revenue of ¥21,500 million and operating profit of ¥2,350 million would provide one checkpoint. Since seasonality has not been disclosed, these figures should be used as progress benchmarks rather than treated as mechanical estimates of the results forecast.

Q1 gross profit was ¥2,772 million, equivalent to approximately 28.0% of revenue. Dividing the full-year gross profit forecast of ¥12,000 million by forecast revenue of ¥43,000 million gives approximately 27.9%, indicating no significant gap between Q1 and the full-year plan at the gross-profit level. For the decline in operating profit, however, the company has provided only a qualitative explanation that profitability declined somewhat. It has not disclosed the breakdown of cost of sales or SG&A, or how many millions of yen were deducted from profit by raw-material costs, personnel expenses and depreciation, respectively.

In H1, we will check which product categories—gelatin, collagen peptides, food materials or biomedical—generated the increase in revenue, as well as how that growth flowed through to the gross and operating margins. If the operating margin improves from Q1's 12.0% and remains well above the full-year target of 10.9%, the Q1 profit decline would appear temporary. Conversely, if the operating margin falls below 10.9% despite revenue growth, the FY2027 profit forecast and the scope for further price revisions will need to be reassessed.