Sales growth continues, but input-purchase prices weigh on operating profit

Q1 revenue was ¥81,603 million, up 8.7% year on year, while operating profit declined by ¥164 million to ¥4,364 million from ¥4,528 million in the same period of the previous year. Because profit declined despite higher revenue, the operating margin fell approximately 0.68 percentage points, from approximately 6.03% to approximately 5.35%. Sales volume was 260 thousand tonnes, up 7% year on year. Although volume growth itself was evident, higher revenue did not translate directly into profit growth.

The factors driving the change in profit included ¥1.4 billion from sales volume, ¥0.2 billion from selling prices, ¥0.8 billion from factory cost reductions, ¥0.4 billion from higher operating profit at consolidated subsidiaries, and ¥1.5 billion from inventory effects and other items. In contrast, input-purchase prices reduced profit by ¥4.5 billion. This comprised a negative ¥4.8 billion impact from raw materials and a positive ¥0.3 billion impact from energy and other items. Foreign-exchange movements also had a negative impact of ¥0.6 billion. Thus, the increase in input and raw-material costs outweighed the profit contribution from higher volume and cost improvements.

In the FY2026 interim period, revenue was ¥149,808 million and operating profit was ¥8,784 million. At the next interim results announcement, it will be necessary to assess not only whether operating profit increased or decreased against these results, but also whether the operating margin returns to approximately 5.9%, its level in the same period of the previous year. The FY2027 full-year forecast is revenue of ¥310,000 million and operating profit of ¥17,500 million, only approximately 0.7% above the previous year’s actual operating profit of ¥17,371 million. Accordingly, if the company cannot absorb cost increases in the first half, achieving the full-year forecast will depend disproportionately on the second half.

The Q1 supplementary materials also mentioned the possibility that the impact of higher input-purchase prices could reach several billion yen compared with the previously disclosed figure. However, specific full-year forecast assumptions, such as exchange rates and raw-material prices, and the company’s interim plan have not been disclosed. At the next results announcement, we will review the factor-by-factor amounts to determine whether price pass-through has progressed, whether the impact of raw-material and energy prices has expanded from Q1, and whether factory cost reductions are continuing after excluding one-off inventory effects.