Full-year profitability still depends on the second half despite the revised first-half loss

FY2027-Q1 revenue was ¥2,764 million, representing 21.3% progress against the full-year revenue forecast of ¥13,000 million. On a simple comparison, in which one quarter represents 25% of the full year, this was 3.7 percentage points below that level. The company reported an operating loss of ¥32 million, an ordinary loss of ¥29 million and a quarterly net loss attributable to owners of the parent of ¥30 million, resulting in negative progress on earnings. At the next interim results announcement, it will be important to confirm not only whether revenue has reached at least close to 50% of the full-year forecast, but also how far operating earnings have recovered.

In the performance forecast revision announced on 30 September, FY2027-H1 net income was revised from the previous forecast profit of ¥60 million to a loss. The revised loss amount was not specified in the information available for this review, so the next results announcement will need to clarify the size of the loss, its relationship with operating and ordinary income, and whether tax expenses or extraordinary gains or losses were involved. The company cited geopolitical conditions in the Middle East, the weak yen, persistently high raw material prices and supply-chain effects, as well as the failure of product-level profitability to improve after price revisions. The key issue will be whether gross margin deterioration is continuing rather than this being merely a seasonal effect.

The company has maintained its full-year forecasts of revenue of ¥13,000 million, operating income of ¥535 million, ordinary income of ¥585 million and net income attributable to owners of the parent of ¥350 million. Starting from the FY2027-Q1 operating loss of ¥32 million, achieving the full-year operating income forecast will require operating income of ¥567 million over the remainder of the year. Similarly, starting from the Q1 net loss of ¥30 million, achieving full-year net income of ¥350 million will require profit of ¥380 million over the remainder of the year. Given that the full-year forecast was left unchanged even after the first-half net loss became apparent, the focus at the next results announcement will be whether the company can provide specific explanations of the price pass-through, normalization of material costs, recovery in sales volumes and easing of investment-related costs assumed for the second half.