Strong FY2027 1Q reflects tailwinds in the first half, while higher material costs and the post-price-revision reversal will weigh on the full year

FY2027 1Q revenue was ¥2,878 million, operating profit was ¥721 million, ordinary profit was ¥741 million, and net profit attributable to owners of the parent was ¥516 million. Year on year, these figures increased by 27.0%, 84.6%, 85.6% and 97.1%, respectively, with operating profit growth substantially exceeding revenue growth. The standalone operating margin for 1Q was approximately 25.1%, above the 20.6% recorded for FY2026 as a whole.

However, the FY2027 full-year guidance announced this time calls for revenue of ¥10,570 million, operating profit of ¥1,170 million, ordinary profit of ¥1,180 million and net profit of ¥780 million. Although 61.7% of full-year guided operating profit had already been recorded in 1Q, the full-year operating profit forecast is 40.3% below FY2026 actual operating profit of ¥1,959 million, indicating that the company is factoring in a substantial deterioration in profitability in the second half. The full-year operating margin is expected to be only approximately 11.1%, a gap of about 14 percentage points from the 1Q result.

The company assumes that tungsten prices will remain at elevated levels, that price revisions will apply to orders received from August, and that sales volumes will decline because of pre-price-revision demand and a subsequent reversal in the second half. Accordingly, in FY2027-H1 it will be necessary to determine whether the high 1Q margin can be maintained in 2Q and whether the volume reversal will occur before the price revision can absorb higher material costs. The earnings impact of higher tungsten prices, the improvement in selling prices from the revision, and the scale of pre-revision demand have not yet been broken out by amount.