Can FY2027-Q1's margin expansion sustain the FY2027-H1 plan?

FY2027-Q1 revenue was ¥65,032 million, up 8.9% year on year, while operating profit was ¥9,290 million, up 38.8%. Progress against the full-year revenue forecast of ¥274,500 million was 23.7%, and progress against the operating profit forecast of ¥36,900 million was 25.2%, indicating that the standalone quarterly results were broadly in line with the full-year plan. The earnings presentation materials put progress against the first-half plan at 49.2% for revenue and 51.3% for operating profit. In FY2027-H1, therefore, the first test will be whether the first-half plan can be achieved in absolute terms, not simply whether revenue and profit increase.

The increase in profit was ¥2,596 million from operating profit of ¥6,694 million in the same quarter of the previous year. By contributor, Maruichi Steel Tube contributed ¥634 million, Maruichi Stainless Tube ¥364 million, other domestic subsidiaries ¥348 million, Leavitt ¥755 million, MNT ¥106 million, MAC ¥121 million and MOST ¥124 million, while MMX and MPST were negative contributors of ¥69 million and ¥86 million, respectively. Improvements across multiple locations contributed to the result, so it cannot be explained solely by a single one-off factor. However, it will be necessary to check whether the benefit from improved North American prices and spreads reverses in the next quarter.

The Q1 operating margin was approximately 14.3%, calculated as ¥9,290 million divided by ¥65,032 million, up approximately 3.1 percentage points from approximately 11.2% in the same quarter of the previous year. It also exceeded FY2026's full-year operating margin of 13.1%, making the key issue for FY2027-H1 whether a margin in the 13% range can be maintained. The Q1 financial results report does not disclose a detailed segment breakdown of the operating margin, changes in cost of sales or SG&A expenses, or the impact of higher domestic coil prices on the margin. The next results will need to show more specifically whether the margin improvement came from sales volume, selling prices, spreads or cost reductions, based on the first-half cumulative figures.

The company has maintained its full-year forecasts at revenue of ¥274,500 million, operating profit of ¥36,900 million, ordinary profit of ¥38,000 million and profit attributable to owners of the parent of ¥25,700 million. At Q1, progress toward the full-year ordinary profit forecast was 27.3%, ahead of operating profit, while progress toward the profit attributable to owners of the parent forecast was only 21.0%. Since the results may be affected by fluctuations in non-operating and extraordinary items, including dividend income, foreign exchange and impairment losses on investment securities, FY2027-H1 will also test whether bottom-line profit builds in line with operating profit, in addition to whether operating profit meets plan.