First-half results are on track against the full-year plan, but second-half cost headwinds remain

First-half FY2026 revenue was ¥2,321.667 billion and adjusted operating profit was ¥280.9 billion, up approximately 10% and 20%, respectively, from the same period a year earlier. The full-year forecasts are revenue of ¥4,500.0 billion and adjusted operating profit of ¥515.0 billion, implying progress of 51.6% for revenue and 54.5% for adjusted operating profit on a simple calculation. Since first-half revenue and profit had already exceeded half of the full-year forecasts, results through the end of the first half were at least in line with the full-year plan.

However, while the company described first-half results as above plan, it said that second-half results are expected to fall below plan because of cost increases related to the situation in the Middle East and other factors. Mechanically subtracting first-half results from the full-year forecasts means that revenue of ¥2,178.3 billion and adjusted operating profit of ¥234.1 billion would be required in the second half to meet the full-year targets. These figures are the differences between the full-year forecasts and first-half results, not separate second-half forecasts provided by the company. They therefore need to be compared with actual second-half demand, pricing and cost progress when the third-quarter results are released.

First-quarter revenue was ¥1,113.4 billion and adjusted operating profit was ¥122.2 billion, while revenue in the second quarter alone rose to ¥1,208.2 billion and adjusted operating profit to ¥158.7 billion, with a margin of 13.1%. The second-quarter standalone operating margin was higher than in the first quarter, providing a basis for assessing whether first-half profit growth reflected not only foreign-exchange translation effects but also sales volumes, pricing, product mix and restructuring benefits. In the third quarter, the focus will be on whether the high level of second-quarter standalone profit was temporary or is continuing through the year-end selling season and winter-tire demand.

The earnings presentation estimated cost increases related to the situation in the Middle East at slightly more than ¥60.0 billion in the second half and approximately ¥70.0 billion for the full year. It also incorporates an annual impact of approximately ¥25.0 billion from U.S. tariffs. The third-quarter results should be checked for the actual impact relative to these estimates, the amount absorbed through pricing, mix improvements and cost reductions, and whether any burden is being carried into the fourth quarter in order to maintain the ¥515.0 billion full-year forecast.