Revenue growth planned, but operating profit set to decline; Q1 broadly in line with plan

Revenue for the fiscal year ended March 2026 was ¥5,374 million and operating profit was ¥235 million, compared with the company's forecasts of ¥5,500 million in revenue and ¥215 million in operating profit for the fiscal year ending March 2027. Revenue is expected to increase 2.3% from the previous year's actual result, while operating profit is expected to decline 8.9%, implying a decline in the operating margin from approximately 4.4% on an actual basis to approximately 3.9% on a forecast basis. Accordingly, at the next earnings release, the key issue will be whether revenue growth is leading to a recovery in margins, rather than simply whether revenue is increasing.

First-quarter revenue was ¥1,327 million and operating profit was ¥53 million. Progress against the full-year forecasts was approximately 24.1% for revenue and 24.7% for operating profit, with no significant lag compared with the 25% passage of the fiscal year. However, revenue declined 4.3% year on year and operating profit fell 24.3%, meaning that profit declined more sharply than revenue. The operating margin calculated from the disclosed figures also fell by approximately 1 percentage point, from approximately 5.1% in the year-earlier quarter to approximately 4.1% in the current quarter.

The decline in margins was significantly affected by a 17.5% decrease in revenue and a 48.4% decrease in segment profit in the electrical and transportation equipment end market. In the construction and packaging end market, revenue increased 1.5%, but segment profit declined 3.2%, indicating that revenue growth did not translate directly into profit improvement. The first-quarter summary report does not break down changes in cost of sales or SG&A expenses by amount, so it will be necessary to determine whether margins recover on a cumulative first-half basis or whether cost controls are merely offsetting weak external demand.

Assuming a simple even split of the full-year forecast between the first and second halves, cumulative revenue of ¥2,750 million and operating profit of ¥107.5 million would serve as benchmarks for the first half. Reaching these levels from the first-quarter results would require second-quarter revenue of approximately ¥1,423 million and operating profit of approximately ¥54.5 million. These benchmarks are not the company's plan itself, but they are useful for assessing at the next earnings release whether the second-quarter margin has improved from approximately 4.1% in the first quarter.