Can margins recover in the first half after absorbing the reversal of one-off factors?

FY2027-Q1 consolidated revenue rose 4.2% year on year to ¥3,538 million, while operating profit fell 37.0% to ¥439 million. The earnings presentation identified the year-on-year decline in operating profit as ¥258 million, with the ¥334 million temporary upside against plan in the environmental energy business in the prior-year Q1 cited as the largest factor behind the decline. Excluding this temporary factor, the environmental energy business contributed ¥100 million to the increase, while the robot SI business contributed ¥8 million. These gains were offset by an ¥11 million decline in the conveyor business and ¥19 million in adjustment costs.

The reversal was also visible in margins. The Q1 gross margin was 33.3% and the operating margin was 12.4%, down 8.0 percentage points and 8.2 percentage points, respectively, from the same period of the prior year. The FY2026 full-year operating margin had risen to 14.3%, so how far the margin recovers from 12.4% in FY2027-H1 will be an important indicator of earnings quality, rather than simply revenue growth. In particular, environmental energy revenue was ¥1,188 million, up just 0.9% year on year, while operating profit was ¥187 million, down 55.6%, making it the main source of the decline in the consolidated margin.

For FY2027, the company forecasts revenue of ¥15,099 million, operating profit of ¥1,965 million, ordinary profit of ¥1,914 million and net profit of ¥1,251 million. As of Q1, progress against the full-year forecast was 23.4% for revenue, 22.4% for operating profit, 22.3% for ordinary profit and 23.4% for net profit. The company explained that Q1 operating profit represented 89.3% of the Q1 plan and 50.2% of the first-half plan. Accordingly, securing approximately ¥987 million in operating profit in the first half would put progress against the full-year plan broadly on track, but if environmental energy recovery costs continue or personnel and overseas activity costs in the conveyor business keep rising, the burden will carry into the second half.

The company has explained the general direction of increases in selling, general and administrative expenses, including recruitment and personnel costs, overseas activity costs, and travel expenses, but has not disclosed the increase by expense category or the cost assumptions and risk amounts incorporated into the FY2027 full-year forecast. Nor was a quarterly cash flow statement prepared for Q1. In FY2027-H1, the key points to monitor together are the margin after the reversal of highly profitable environmental energy projects has run its course, the amount of project recovery costs, the pace of increases in personnel and overseas costs, and progress toward the first-half operating profit plan.