Revenue growth, but a narrower price spread drove an operating profit decline; first-half margin recovery is the focus

Revenue for the first quarter of the fiscal year ending March 2027 was ¥20,082 million, up 4.2% from ¥19,265 million in the year-earlier quarter. Operating profit was ¥2,542 million, ordinary profit was ¥2,532 million, and net profit attributable to owners of the parent was ¥1,542 million, down 29.2%, 30.8% and 33.9%, respectively, year on year. Although revenue growth driven by higher volumes was confirmed, profitability showed a clear reversal.

The operating margin fell approximately 6.0 percentage points, from about 18.7% in the year-earlier quarter to approximately 12.7% in the first quarter under review. The company cited the narrowing “price spread” between product prices and raw material prices as the main reason for the decline in profit, but did not provide a factor-by-factor breakdown showing how many millions of yen product prices, raw material prices and shipment volumes each contributed to operating profit. The reason revenue growth did not translate into higher profit can therefore be identified directionally, but not at a level that allows its repeatability to be tested.

The full-year operating profit forecast is ¥10,000 million, putting first-quarter progress at 25.4%, slightly above the simple 25% benchmark based on the passage of one quarter. However, reaching ¥5,000 million in the first half would require ¥2,458 million in the second quarter in addition to the ¥2,542 million recorded in the first quarter. At the next results announcement, it will be necessary to check not only whether revenue growth continues, but also whether the operating margin improves from 12.7% as the price spread recovers.

By segment, first-quarter profit in the steel business was ¥2,436 million, almost determining the decline in consolidated operating profit. Despite steel-business revenue increasing 4.3% year on year to ¥19,852 million, segment profit fell 30.3%. In FY2027-H1, whether the steel business’s profit margin exceeds at least the approximately 12.3% recorded in the first quarter, and whether the impact of the narrower price spread is disclosed quantitatively, will help determine whether profit recovery is under way.