Q1 improved, but operating and ordinary results remain in the red

FY2027-Q1 revenue was ¥31.104 billion, up ¥4.23 billion, or 15.7%, from ¥26.874 billion in the year-earlier quarter. The operating result also improved from an operating loss of ¥853 million in the year-earlier quarter to an operating loss of ¥250 million, while the ordinary result improved from an ordinary loss of ¥1.078 billion to an ordinary loss of ¥581 million. However, losses remain at the operating and ordinary levels, and the recovery in revenue has not translated directly into profitability in the core business.

Quarterly net income attributable to owners of the parent was ¥259 million, compared with a loss of ¥1.111 billion in the year-earlier quarter. However, this includes the effects of tax-effect accounting and deferred hedge gains and losses, so it is premature to judge the recovery in core-business earnings based solely on the return to net profitability. In FY2027-H1, it will be necessary to determine whether the improvement in operating and ordinary results is being driven by improvements in the smelting, environmental and recycling, and metal recycling businesses, rather than by non-operating or tax-related factors.

The full-year forecasts are ¥178.5 billion in revenue, ¥6.7 billion in operating profit, ¥4.5 billion in ordinary profit and ¥3.45 billion in profit attributable to owners of the parent, with Q1 revenue at 17.4% of the full-year forecast. As Q1 recorded an operating loss, a simple calculation implies that operating profit equivalent to ¥6.95 billion must be generated over the remaining 9 months, making quarterly profit recovery a prerequisite. At the interim stage, it will be necessary to confirm whether operating results were positive in Q2 alone and how much of the Q1 loss was absorbed.

The year-on-year improvement is clear, but profit progress against the full-year forecasts remains difficult to assess. At the next earnings announcement, it will be important to confirm not only whether the full-year forecasts are revised, but also the second-half assumptions required to achieve ¥6.7 billion in operating profit, the assumptions for metal prices and foreign exchange, the remaining restructuring costs and the outlook for inventory valuation losses.