Reviewing first-quarter profitability in H1 despite revenue growth

In the first quarter from April to June 2026, revenue was ¥3,090.411 million, up 1.0% year on year, while operating profit was ¥22.512 million, down 37.1%, ordinary profit was ¥42.696 million, down 18.2%, and quarterly net profit attributable to owners of the parent was ¥19.941 million, down 28.8%. The operating margin calculated from revenue and operating profit was approximately 0.73%, showing that revenue growth did not translate into profit growth.

The company attributed the decline in profit to the poor performance of a consolidated subsidiary and the impact of higher raw material prices on certain products. However, it did not disclose operating profit and loss by subsidiary, the reduction in profit caused by higher raw material prices, or the amount passed through to selling prices, so an amount-based bridge of the factors affecting operating profit of ¥22.512 million cannot be prepared. In H1, it will be necessary to determine whether the factors described in the first quarter were temporary or represent structural pressure continuing into the second half.

Operating profit for the fiscal year ended March 2026 was ¥790.687 million and revenue was ¥16,321.050 million, producing an operating margin of approximately 4.84%. The company’s forecasts for the fiscal year ending March 2027 are revenue of ¥15,300 million and operating profit of ¥680 million, implying a forecast operating margin of approximately 4.44%. The first-quarter margin of 0.73% is well below the full-year forecast margin, making it important to determine whether profitability rises above the first-quarter level in H1 and returns toward the full-year forecast.

In the H1 earnings release, we will check cumulative revenue, operating profit, operating margin, ordinary profit and net profit. The key points will be not only whether operating profit exceeds ¥22.512 million, but also how much the 37.1% year-on-year decline narrows and whether the amount of improvement in the consolidated subsidiary’s profit and loss and the progress of passing higher raw material costs through to prices are disclosed. The gap between the full-year operating profit forecast of ¥680 million and the first-quarter result is ¥657.488 million, but this should be treated as the simple amount still required over the remaining period, not as an H1 target.