First-quarter earnings growth will test progress toward the first-half plan

First-quarter revenue was ¥12,382 million, operating profit was ¥1,250 million, ordinary profit was ¥1,405 million and quarterly net profit was ¥784 million. Year on year, revenue rose 2.3%, operating profit 82.7%, ordinary profit 216.5% and quarterly net profit 302.8%, indicating that margin improvement contributed more than revenue growth. The operating margin rose from approximately 5.6% a year earlier to approximately 10.1%.

In its first-quarter disclosure, the company revised its cumulative second-quarter revenue forecast to ¥24,900 million and its operating profit forecast to ¥1,600 million. As of the first quarter, progress was approximately 49.7% for revenue and 78.1% for operating profit. On a simple calculation, the company would reach its first-half forecast by recording revenue of ¥12,518 million and operating profit of ¥350 million in the second quarter. These figures are not the company’s disclosed standalone second-quarter forecasts, but the analytical balance remaining after subtracting first-quarter actual results from the previously published first-half forecasts. The next earnings report will therefore need to distinguish standalone second-quarter profitability.

For the full year, revenue of ¥48,000 million, operating profit of ¥3,700 million, ordinary profit of ¥3,000 million according to the financial summary, and net profit of ¥1,700 million are forecast. The revenue forecast is 2.2% above the previous year’s actual result of ¥46,952 million, while the operating profit forecast is approximately 33.0% below the previous year’s actual result of ¥5,524 million. Despite the first-quarter operating margin improving to 10.1%, the full-year plan remains below the previous year’s profit, which may indicate that the company has adopted cautious assumptions for second-half pricing, volumes, foreign exchange and costs.

The company attributed first-quarter profit growth primarily to the weaker yen in the titanium business and higher sales volumes in the advanced materials business. However, it has not disclosed the monetary effects of the weaker yen, pricing, volumes, or personnel and inflation costs. At the next earnings report, it will be important to confirm not only whether first-half operating profit of ¥1,600 million was achieved, but also the basis for maintaining the full-year forecast of ¥3,700 million, the foreign-exchange assumptions for the second half, and the respective contributions of selling prices and sales volumes.