Will the impact of the domestic steel plant shutdowns drop out, bringing the business back into the black?

Consolidated revenue in Q1 of the fiscal year ending March 2027 was ¥39,195 million, almost unchanged from ¥39,199 million in the same quarter of the previous year, while operating profit deteriorated from ¥1,115 million to a loss of ¥446 million. The steel business in Japan was particularly weak, with revenue down ¥4,503 million year on year to ¥9,203 million and segment profit down ¥2,761 million to a loss of ¥1,863 million. The earnings release attributed this to stagnant demand for construction and civil-engineering projects, higher costs including steel scrap prices, and an approximately 2-month shutdown for rolling-equipment upgrades.

The weakness in the domestic business reflects not only the temporary shutdown but also the company's inability to pass higher costs through to selling prices sufficiently. For the full fiscal year ended March 2026, the Japan segment generated revenue of ¥52,981 million and profit of ¥1,494 million, down ¥4,467 million from the previous year's ¥5,961 million. For this Q1, the company did not disclose a factor-by-factor breakdown quantifying how many millions of yen were deducted from operating profit by lost revenue and profit from the shutdown, higher scrap prices, weak demand and insufficient price pass-through.

At the same time as announcing its Q1 results, the company raised its forecast for cumulative operating profit for the first 6 months by ¥300 million, from ¥500 million to ¥800 million. In contrast, its full-year operating profit forecast was cut by ¥1,300 million, from ¥4,500 million to ¥3,200 million. Based on the Q1 operating loss of ¥446 million, operating profit of ¥1,246 million in Q2 alone is required to reach the cumulative target of ¥800 million. Against the full-year forecast of ¥3,200 million, even achieving ¥800 million for the first 6 months would require an additional ¥2,400 million in the second half.

At the next results announcement, it will be necessary to confirm whether the equipment upgrades were completed as scheduled and whether the shutdown's impact has carried over into Q2. Specifically, the focus will be on whether Japan segment profit recovers from a loss of ¥1,863 million to at least ¥0 million, whether revenue exceeds ¥9,203 million, and whether increases in steel scrap and energy costs were passed through to selling prices. For the domestic business, the information released this time did not provide quantitative indicators such as the number of shutdown days, sales volume, steel margins or the amount of price pass-through, so any additional disclosure of these items will also be important.