The full-year profit forecast depends on non-operating income while operating losses continue

Revenue in the first quarter of the fiscal year ending March 2027 was ¥2,470 million, while the operating loss was ¥882 million. The operating loss margin reached approximately 35.7% based on a simple calculation, while ordinary income was ¥421 million and net income attributable to owners of the parent was ¥322 million. Despite continued losses at the operating level, ordinary income and net income were positive through non-operating income and loss and other items. This will be the first point to check in the next first-half results.

Following the earnings revision on 29 October, the full-year forecast for the fiscal year ending March 2027 was revenue of ¥11,188 million, an operating loss of ¥6,035 million, ordinary income of ¥1,831 million, net income attributable to owners of the parent of ¥1,321 million, and earnings per share of ¥75.94. The first-half ordinary income forecast was also reportedly revised from an ordinary loss of ¥750 million to ordinary income of ¥950 million. In other words, even assuming that the company secures positive ordinary income in the first half, the full-year operating result is still expected to remain substantially negative.

In the previous fiscal year, the fiscal year ended March 2026, the company recorded an operating loss of ¥4,971 million, ordinary income of ¥3,323 million, and net income attributable to owners of the parent of ¥2,610 million. The full-year forecast plans for the operating loss to widen by a further ¥1,064 million from the previous year’s result, while ordinary income and net income are both expected to remain positive. In the previous fiscal year, the company recorded equity-method investment income of ¥7,875 million, confirming a profit structure in which investment income from affiliates substantially offset the operating loss in the ferronickel business.

The first quarter also produced ordinary income of ¥421 million against an operating loss of ¥882 million, making it important to determine how much non-operating income and loss items, including equity-method investment income, dividends received, and foreign-exchange gains and losses, contributed in the first half. Based on the information currently disclosed, the breakdown of equity-method investment income by company, the bridge from first-half operating results to ordinary results, and the respective effects of ferronickel selling prices, sales volume, and raw-material costs on profit cannot be confirmed at a sufficient level of detail.

In the next results announcement, it will be necessary to start by determining how far the first-half operating loss narrowed from ¥4,042 million in the same period of the previous year, and then break down the extent to which the ¥950 million ordinary income forecast was achieved. If a large operating loss remains and positive results are secured solely through non-operating income, the likelihood of achieving full-year net income of ¥1,321 million will be dependent on the performance of affiliates and fluctuations in equity-method investment income. Conversely, if both an improvement in the operating loss and stability in investment income can be confirmed, it will be easier to assess that the effects of the business transformation are beginning to appear in earnings.