Q1 revenue and profit increased, but operating profit growth lagged revenue growth

In FY2027-Q1, consolidated revenue increased 30.8% year on year to ¥2,683.456 million, operating profit rose 14.1% to ¥366.027 million, ordinary profit increased 29.5% to ¥455.687 million, and profit attributable to owners of the parent rose 29.7% to ¥293.663 million. Both revenue and operating profit increased, which is positive because the company is not recovering from a period of losses or a one-off substantial deficit.

However, the operating margin was approximately 13.6%, calculated as ¥366.027 million divided by revenue of ¥2,683.456 million. In the same period of the previous year, revenue was ¥2,050.984 million and operating profit was ¥320.804 million, producing an operating margin of approximately 15.6%. Revenue therefore increased by ¥632.472 million, but operating profit increased by only ¥45.223 million, causing the margin to decline by approximately 2.0 percentage points. A key issue for the next interim period will be whether the increase in revenue reflects higher sales of lower-margin products, a change in the segment mix, higher material costs, or increased development and integration expenses.

By segment, the industrial equipment business made a significant contribution to profit, with revenue of ¥408.965 million and segment profit of ¥113.734 million. The gas equipment business generated revenue of ¥700.770 million but profit of only ¥6.159 million, while the general-purpose equipment business generated revenue of ¥1,165.740 million and profit of ¥120.934 million. The automotive equipment business posted revenue of ¥218.550 million and a loss of ¥23.203 million, while the real estate leasing business generated revenue of ¥189.431 million and profit of ¥148.401 million. The decline in the operating margin indicates that the industrial equipment business alone did not fully offset deteriorating profitability in the gas equipment and general-purpose equipment businesses.

The company attributed the increase in company-wide profit to solid sales in the industrial equipment and general-purpose equipment businesses, higher revenue, and foreign exchange trends that remained weaker than the company had assumed. It cited a decline in contract testing in the gas equipment business and higher costs for certain materials in the general-purpose equipment business as factors weighing on profit. However, it has not disclosed a company-wide breakdown of the effects of foreign exchange, volume, price revisions, and higher material and logistics costs. In FY2027-H1, it will be necessary to assess whether the operating margin recovers to 13.6% or higher and whether the industrial equipment business is merely temporarily masking lower profitability in the existing businesses, together with the margins of each segment.