Revenue declined in Q1, but the operating margin improved; a recovery in sales is needed to meet the full-year forecast

Consolidated revenue in FY2027-Q1 was ¥4,673 million, down 10.0% year on year, while operating profit was ¥430 million, down 0.7%. Operating profit declined less than revenue, and the operating margin improved by approximately 0.9 percentage points to approximately 9.2%, from approximately 8.3% in the same quarter of the prior year. Ordinary profit rose 11.2% to ¥564 million, and quarterly net profit attributable to owners of the parent rose 10.1% to ¥381 million, but these results were supported by non-operating income, including dividends received, and should be assessed separately from a recovery in core sales.

The full-year forecasts were unchanged at ¥23,560 million in revenue, ¥1,410 million in operating profit, ¥1,580 million in ordinary profit, ¥1,080 million in net profit and annual dividends of ¥20. The first-quarter progress rates were 19.8% for revenue, 30.5% for operating profit, 35.7% for ordinary profit and 35.3% for net profit. The profit measures exceeded the simple 25% benchmark, while revenue remained below the 25% elapsed-period benchmark. To reach the full-year forecasts over the remaining 3 quarters, the company must generate an additional ¥18,887 million in revenue and ¥980 million in operating profit. It will therefore be important in FY2027-H1 to determine whether the delay in revenue reflects a temporary shift in project acceptance or a continuing demand slowdown.

First-quarter segment revenue was ¥1,451 million for machine tools, ¥1,534 million for firearms, ¥152 million for special-purpose vehicles, ¥733 million for building materials, ¥128 million for real estate leasing, ¥505 million for the domestic sales subsidiary and ¥135 million for the domestic transportation subsidiary. Segment operating profit was ¥218 million for machine tools, ¥88 million for firearms, ¥38 million for building materials, ¥102 million for real estate leasing and ¥26 million for the domestic sales subsidiary, while special-purpose vehicles recorded a loss of ¥59 million and the domestic transportation subsidiary a loss of ¥3 million. The next interim results should show whether the improvement in the company-wide margin reflects sustained improvement across multiple businesses or a temporary project mix, such as the completion of a high-margin machine-tool project.

In FY2027-H1, attention will be focused on cumulative revenue progress, the operating margin, changes in segment profitability and the potential revision of the full-year forecasts. The first-quarter summary results did not disclose orders received, order backlog, regional revenue or operating cash flow. Whether additional information will be provided to assess the weakness in revenue from the perspectives of orders and cash collection will also be a key issue.