Can the downward earnings trend be reversed in FY2027 H1 while the full-year outlook remains unchanged?

In the first quarter from April to June 2026, revenue was ¥1,793 million, operating income was ¥80 million, ordinary income was ¥74 million and net income was ¥55 million. Year on year, revenue fell 10.7%, operating income fell 26.4%, ordinary income fell 33.8% and net income fell 35.1%, indicating a sharper decline in earnings than in the top line. Progress against the full-year outlook was approximately 22.5% for revenue, 20.8% for operating income and 21.2% for net income.

The company has not disclosed a specific FY2027 H1 forecast. Accordingly, the figures of ¥3,987.5 million, ¥192.5 million and ¥130 million for the first-half cumulative results are mechanical benchmarks obtained by dividing the full-year outlook by 50%. No quarterly plan that takes seasonality or the timing of construction inspections into account has been disclosed, so these benchmarks cannot be treated as the company's actual plan. However, with first-quarter progress at only 20.8% for operating income, they provide a basis for measuring how much earnings progress improves by the second quarter.

Actual revenue and operating income in the fiscal year ended March 2026 were ¥7,525 million and ¥405 million, respectively. For the fiscal year ending March 2027, the company plans to increase revenue by ¥450 million, or 6.0%, while forecasting operating income of ¥385 million, down ¥20 million, or 5.0%. The operating margin is therefore expected to decline from approximately 5.4% in the previous fiscal year to approximately 4.8% under the full-year outlook, meaning that revenue growth is not expected to translate directly into earnings recovery. The forecasts for ordinary income and net income are ¥370 million and ¥260 million, respectively, both below the previous fiscal year's actual results.

The company attributed the first-quarter decline in revenue and earnings to a contraction in voluntary construction work in the electric power industry amid higher labor and material costs, delays in construction schedules caused by labor shortages and construction-cost reviews in the construction industry, and weak orders for specialty products such as fencing work. It also cited higher manufacturing expenses, including depreciation related to the construction of the Toyama Kureha Plant. However, it has not disclosed how much each factor contributed to the ¥214 million decline in revenue or the decline in operating income.

At the next results announcement, the focus will be not only on where first-half results stand against the simple 50% progress benchmark, but also on whether the basis for maintaining the full-year outlook becomes more specific. Unless the company provides evidence of not only a recovery in revenue but also the achievement of ¥192.5 million in first-half operating income, the assumption of an operating margin of approximately 4.8% for the full year, and improvements in specialty-product orders and construction delays, it will be difficult to assess the reliability of a plan that combines revenue growth with lower earnings.