Q1 earnings are progressing well, but FY2027 net profit will depend on when the gain on disposal is recognized

FY2027-Q1 revenue was ¥60,220 million, operating profit was ¥3,900 million, ordinary profit was ¥4,614 million, and net profit attributable to owners of the parent was ¥4,041 million. Year on year, revenue increased 23.9%, operating profit 58.5%, ordinary profit 17.9%, and net profit 68.2%, representing substantial increases in both revenue and profit on the surface. Revenue progress toward the full-year forecast of ¥259,000 million was 23.3%, while operating profit progress toward the ¥10,000 million forecast was 39.0%, meaning profit progress was substantially ahead of revenue progress.

However, the composition of the full-year forecast is difficult to compare directly with Q1 results. The FY2027 full-year forecasts are revenue of ¥259,000 million, operating profit of ¥10,000 million, ordinary profit of ¥9,700 million, and net profit of ¥14,500 million, of which 27.9% had been recorded by the end of Q1. Q1 extraordinary income was only ¥6 million and extraordinary losses were ¥14 million, while the company indicated that it expects to record approximately ¥6,000 million as a gain on the sale of fixed assets following completion, after the reporting date, of the transfer of the former smelter site in Australia.

In FY2026, operating profit increased to ¥11,299 million and ordinary profit to ¥13,733 million, while net profit declined 31.4% to ¥12,777 million from ¥18,619 million a year earlier. Extraordinary income included a ¥7,223 million gain on the sale of investment securities, while extraordinary losses included a ¥2,194 million provision for environmental measures. Final profit therefore cannot be explained by improvement in the core business alone. The sharp increase in the FY2027 net profit forecast from the previous ¥5,100 million to ¥14,500 million also includes non-recurring items such as the gain on the sale of the former site, making it necessary to assess earnings quality.

In FY2027-H1, the focus will be on which quarter actually records the gain on the sale of fixed assets, and the amounts of related tax expenses and cost of disposal. It will also be important to determine whether operating profit progress builds further from Q1's 39.0%, whether improvement continues in the Metals, Electronics and Chemical Products businesses, and whether the company explains profit attributable to owners of the parent excluding the gain on disposal or other adjusted profit measures.