Q1 operating profit reached 46.7% of the full-year forecast, but sustainability through H1 is the focus

FY2027-Q1 sales were ¥253,395 million, operating profit was ¥24,748 million, ordinary profit was ¥32,527 million, and net profit attributable to owners of the parent was ¥23,452 million. Year on year, these increased by 58.2%, 281.0%, 277.5%, and 266.4%, respectively, with profit growth outpacing sales growth. The full-year forecasts are sales of ¥941,000 million, operating profit of ¥53,000 million, ordinary profit of ¥80,000 million, and net profit of ¥57,000 million, representing simple progress rates of 26.9%, 46.7%, 40.7%, and 41.1%, respectively.

The operating margin was approximately 9.8% in Q1 alone, up approximately 5.7 percentage points from approximately 4.1% in the same quarter of the previous year. Since the progress rate for operating profit is significantly higher than that for sales, profit is currently running ahead of revenue. However, the increase in profit includes favorable movements in metal prices and foreign exchange, as well as a contribution from the smelting business, and cannot be explained solely by fixed-cost absorption and volume growth. In FY2027-H1, it will be necessary to confirm whether Q1's high profit margin can be reproduced in Q2.

When assessing profit levels, attention should also be paid to the ¥7,779 million difference between operating profit of ¥24,748 million and ordinary profit of ¥32,527 million. This may include the impact of non-operating factors such as nonferrous metal prices, foreign exchange, hedging transactions, and mining-related earnings. However, no cash flow statement was prepared for Q1, so the extent to which profit was accompanied by the conversion of working capital and inventories into cash has not been disclosed. In FY2027-H1, an important disclosure issue will be whether the company provides supplementary information on operating cash flow, changes in inventories and accounts receivable, and changes in interest-bearing debt.

For the next results announcement, cumulative H1 operating profit of ¥26,500 million, equivalent to 50% of the full-year forecast, will serve as a mechanical reference point. Since Q1 alone reached ¥24,748 million, exceeding ¥1,752 million in Q2 alone would bring the company to this level, but this is only a minimum benchmark for assessing whether the loss of market-related gains can be absorbed sufficiently. In addition to whether H1 sales exceed ¥470,500 million, ordinary profit exceeds ¥40,000 million, and net profit exceeds ¥28,500 million, we will examine whether the company leaves its full-year forecasts unchanged and whether it updates its market assumptions or segment outlook.