Sales recovered, but margins declined in FY2027-Q1, making H1 earnings delivery the key focus

FY2027-Q1 consolidated revenue was ¥8,117.2 million, an increase of ¥643.3 million, or 8.6%, from ¥7,473.9 million in the same period of the previous year. The company cited the impact of increased production by customers and foreign exchange effects, among other factors, as drivers of the increase. Operating profit, however, was ¥301.1 million, down ¥107.0 million, or 26.2%, from ¥408.1 million in the same period of the previous year. As operating profit declined despite higher revenue, the operating margin fell 1.75 percentage points, from approximately 5.46% to approximately 3.71%.

The full-year forecasts remain unchanged at ¥285,000 million in revenue, ¥11,500 million in operating profit, ¥11,500 million in ordinary profit, and ¥4,500 million in net income attributable to owners of the parent. FY2027-Q1 progress rates were approximately 28.5% for revenue, 26.2% for operating profit, and 22.3% for net income. Compared with a simple even quarterly allocation, revenue and operating profit are broadly on plan, but net income is progressing relatively slowly and requires review, including the impact of extraordinary gains and losses and the tax burden. For FY2027-H1, revenue of ¥142,500 million, operating profit of ¥5,750 million, and net income of ¥2,250 million would each represent half of the full-year forecast.

The reasons why higher revenue did not translate into profit are clear when viewed by segment. Japan posted revenue of ¥2,486.6 million, up 13.8% year on year, but recorded a segment loss of ¥92.8 million. The Americas posted revenue of ¥3,560.9 million, up 6.9%, and segment profit of ¥349.5 million. Europe posted revenue of ¥1,227.6 million, up 31.7%, and profit of ¥48.0 million. Asia, meanwhile, posted revenue of ¥842.1 million, down 17.8%, and a loss of ¥15.8 million. Although some regions delivered higher revenue, losses in Japan and lower revenue in Asia remain, weighing on the group-wide margin.

At the next earnings release, we will review whether the volume benefit from increased production continues into the second quarter, whether higher revenue depends on foreign exchange translation effects, and whether the operating margin recovers from 3.71%. In addition, the amounts attributable to increased production, foreign exchange, transfer pricing tax adjustments, lower depreciation and other factors have not been disclosed separately at this stage. In addition to FY2027-H1 revenue and operating profit, key items will be the operating margin, the factors affecting segment profit and loss, and whether the full-year forecasts remain unchanged or are revised.