How much of the first-quarter decline in revenue and profit can be recovered in the first half?

Revenue in FY2027-Q1 was ¥5,522 million, down 4.9% from ¥5,806 million in the year-earlier period. Operating profit was ¥405 million and ordinary profit was ¥494 million, down 28.6% and 22.5% year on year, respectively. The full-year forecasts are revenue of ¥22,700 million, operating profit of ¥2,170 million, ordinary profit of ¥2,370 million and profit attributable to owners of the parent of ¥1,560 million. As of the first quarter, progress stood at 24.3% for revenue, 18.7% for operating profit and 20.8% for ordinary profit.

The deterioration in margins exceeded the decline in revenue. The operating margin was approximately 7.3% in the current period, calculated as ¥405 million divided by ¥5,522 million, versus approximately 9.8% in the year-earlier period, calculated as ¥567 million divided by ¥5,806 million, a decline of approximately 2.4 percentage points. The company attributed the decline in revenue to a deterioration in the procurement environment for building materials and concerns about construction delays, but it did not disclose in the first quarter how many millions of yen procurement costs, logistics costs and labor costs each reduced operating profit.

Profit attributable to owners of the parent increased 122.2% year on year to ¥178 million, but this needs to be viewed separately from an underlying improvement in profitability. Litigation losses in the first quarter were ¥139 million, down ¥634 million year on year. Accordingly, the increase in net profit should not be equated with an improvement in operating and ordinary profit. In FY2027-H1, the trend in business profit excluding changes in litigation losses will need to be monitored.

The earnings supplementary materials assume a year-on-year decline in revenue and profit in the first half of the fiscal year ending March 2027, while showing that the forecast is based on the benefits of sales price revisions emerging in the second half. At the next earnings release, it will be necessary to assess whether first-half results were within this cautious assumption, whether the full-year forecasts of ¥22,700 million in revenue and ¥2,170 million in operating profit are maintained, and whether revenue and operating profit in the second quarter alone recovered year on year. In particular, whether the operating margin returns from the 7% range to the 8% range will affect market confidence in the benefits of price revisions in the second half.