Confirm whether the return to profitability becomes established in FY2027 H1.

FY2027 1Q revenue was ¥3,165 million, up ¥329 million, or 11.6%, from ¥2,836 million in the same period of the previous year. Operating income improved from a ¥73 million loss in the same period of the previous year to a ¥31 million profit, marking a return to profitability. Ordinary income also improved from a ¥62 million loss to a ¥39 million profit, while quarterly net income attributable to owners of the parent improved from a ¥53 million loss to a ¥11 million profit. The operating margin rose approximately 3.6 percentage points, from approximately -2.6% in the same period of the previous year to approximately 1.0%. However, operating profit remains only around 1.0% of revenue in absolute terms, leaving the company at a level where even minor cost fluctuations could push it back into the red.

The main factors behind the increase in revenue were strong sales of 18-liter cans for paints and chemicals and the start-up of new production equipment for decorative cans. By product, 18-liter cans generated ¥2,443 million, up 8.3% year on year, while decorative cans generated ¥560 million, up 27.6%. However, the company has not separately disclosed the increase in revenue or profit attributable to the new equipment, its utilization rate, or the increases in costs such as depreciation and personnel expenses. In H1, we will monitor not only the revenue growth rate but also whether the operating margin can remain at approximately 1.0% in 1Q and whether fixed costs following the equipment start-up are being absorbed.

The full-year forecasts are revenue of ¥11,525 million, an operating loss of ¥104 million, an ordinary loss of ¥135 million and a net loss of ¥69 million, with no revisions as of 1Q. 1Q revenue represented approximately 27.5% of the full-year forecast, above the 25% implied by simple equal quarterly allocation. However, because the full-year operating profit forecast is negative, a standard progress rate cannot be applied to operating profit. A simple calculation starting with 1Q operating profit of ¥31 million implies a combined operating loss of ¥135 million over the remaining 3 quarters to reach the full-year forecast of a ¥104 million loss, but this is not a quarterly plan provided by the company. If profitability continues in H1, the costs and seasonal factors assumed for the second half will be important.

The company says that the outlook remains uncertain because of continued inflation, the situation in the Middle East, and the impact of financial and capital markets. In H1, it will be necessary to monitor changes in sales volume and unit prices for 18-liter and decorative cans, the extent to which raw material and energy costs are being passed through, and whether segment profit in the Metal Can Manufacturing and Sales business has increased from ¥10.328 million in 1Q.