The focus in the first half of FY2027 will be the progress of the profit recovery rather than revenue.

Revenue in Q1 FY2027 was ¥50,862 million, up 0.4% year on year, while operating profit fell 43.6% to ¥1,441 million. The operating margin calculated from the reported figures was 2.83%, approximately 2.21 percentage points below the approximately 5.04% calculated from operating profit of ¥2,556 million and revenue of ¥50,677 million in the same quarter of the previous year. Profit fell sharply while revenue was largely maintained, shifting the key issue from demand to profitability, including selling prices, manufacturing costs and fixed costs.

The full-year forecasts are revenue of ¥230,000 million, operating profit of ¥16,000 million, profit before tax of ¥15,000 million and profit attributable to owners of the parent of ¥11,000 million. They had not been revised as of the results announcement. Q1 progress was approximately 22.1% for revenue and 9.0% for operating profit, with operating profit particularly slow against 25% of the fiscal year having elapsed. Assuming a simple even progression, first-half revenue of ¥115,000 million and operating profit of ¥8,000 million provide reference points, but seasonality in automotive production and equipment sales means they should be treated as benchmarks for measuring distance from the company plan, not as absolute targets.

The company said that production volumes of automotive frames for its main customers fell approximately 7% year on year, while the weaker yen supported revenue. On the profit side, the company said changes in the business environment in China and recognition of one-off expenses reduced profit, while the effects of structural reforms, including consolidation of manufacturing sites and production lines and workforce optimization, continued. Accordingly, at the next results release, it will be necessary to confirm whether standalone Q2 operating profit remains positive, whether cumulative first-half operating profit approaches ¥8,000 million, and whether selling-price improvements and cost reductions lifted profit even excluding the benefit of the weaker yen.

The Q1 disclosure did not provide a breakdown by amount of the one-off expenses in China or a bridge showing the cost savings from structural reforms. In addition, the operating margin is a calculated figure based on revenue and operating profit, rather than a company-disclosed figure. At the next results release, it will be important to see whether the year-on-year change in operating profit can be explained by selling prices, production volumes, foreign exchange, materials and labor costs, site-consolidation effects and one-off expenses. Even if the full-year forecast remains unchanged, failure of margins and cumulative progress to improve in Q2 would make the plan's back-end weighting clear.