Revenue increased, but operating profit declined, resulting in a lower first-half margin.

Consolidated revenue in FY2026-H1 was ¥6,638 million, up ¥186 million, or 2.9%, from ¥6,452 million in the same period of the previous year. However, operating profit was ¥889 million, ¥4 million below the ¥893 million recorded in the same period of the previous year. Ordinary profit was ¥929 million, while interim net profit attributable to owners of the parent was ¥635 million. Profit did not keep pace with revenue growth, resulting in higher revenue but lower profit.

Based on a simple calculation, the operating margin was approximately 13.84% in the same period of the previous year and approximately 13.39% in FY2026-H1, a decline of approximately 0.45 percentage points. The company explicitly cited a decline in the gross margin due to surging material costs, as well as aggressive sales promotion, product development and human capital investment, as factors behind the decline in profit. However, it did not disclose a quantitative bridge showing how many millions of yen each factor, including material costs, promotional expenses, product development costs and personnel and human capital investment expenses, reduced operating profit.

In FY2026-Q3, we will look to see whether the operating margin declines further despite revenue growth, or whether higher overseas revenue and domestic electrical installation projects can absorb rising costs. In particular, whether operating profit exceeds the same period of the previous year and whether the operating margin improves from approximately 13.4% will be important in assessing the likelihood of achieving the full-year operating profit forecast of ¥1,480 million.

Another issue is whether surging material costs reflect a temporary deterioration in procurement conditions or will persist as a delay in passing costs on to customers. In the next earnings release, we will check whether additional details are provided on the gross margin, selling, general and administrative expenses, research and development expenses, and salaries and bonuses, or whether the explanation remains qualitative, as it was this time.