Q1 revenue and operating profit increased, but progress against the full-year plan was only 18.6% for revenue and 5.7% for operating profit

Net sales in FY2027-Q1 were ¥23,098 million, up 2.5% year on year, while operating profit was ¥537 million, up 6.5%. Ordinary profit was ¥906 million, up 45.1%, and quarterly net profit attributable to owners of the parent was ¥526 million, up 23.2%. On a consolidated basis, operating, ordinary and net profit were all positive. However, the full-year forecasts are ¥124,000 million for net sales, ¥9,500 million for operating profit, ¥9,200 million for ordinary profit and ¥7,200 million for net profit, leaving Q1 progress rates at just 18.6%, 5.7%, 9.8% and 7.3%, respectively.

Operating profit is progressing more slowly than net sales because Q1 profit has not reached a simple one-quarter of the full-year plan. The Q1 operating margin was approximately 2.3%, calculated as ¥537 million divided by ¥23,098 million, only about 0.1 percentage point higher than the approximately 2.2% recorded in the same quarter a year earlier. The operating margin for the previous full year was 7.9%, so in FY2027-H1 it will be necessary to determine whether Q1’s low margin reflects seasonal factors or structural factors related to product mix, regional mix and SG&A expenses.

As FY2027-H1 represents half of the full year, a simple benchmark would be ¥62,000 million in net sales and ¥4,750 million in operating profit. However, the company has not disclosed profit plans by first and second half or the amounts required over the remaining period. Accordingly, in Q2 it will be important to see whether the company discloses cumulative net sales and operating profit, progress rates against the full-year forecasts, the timing of revenue recognition for major projects expected in the second half, and regional delivery plans.

The full-year plan calls for net sales to rise 4.5% and operating profit 1.0% from the previous year, representing almost flat profit growth, while ordinary profit is expected to decline 14.2% and net profit 2.3%. Even if operating profit meets plan, ordinary profit could fall short because of a reversal in non-operating gains and losses, such as foreign-exchange gains. In FY2027-H1, we therefore want to review not only operating profit but also foreign-exchange gains and losses, profit before tax and the corporate tax burden.