Q1 profit progress lagged far behind revenue progress, leaving a substantial shortfall to recover against the full-year plan

Revenue in Q1 was ¥18,849 million, up ¥589 million, or 3.2%, from ¥18,260 million in the same period of the previous year. Operating profit, however, was ¥540 million, down ¥837 million, or 60.8%, from ¥1,377 million. The operating margin calculated on a simple basis fell from approximately 7.5% in the same period of the previous year to approximately 2.9%, a deterioration of approximately 4.7 percentage points. Despite maintaining or expanding the scale of revenue, the sharp decline in profit is the highest-priority item to confirm in the second-quarter results.

The full-year forecasts are revenue of ¥115,500 million, operating profit of ¥14,500 million and profit attributable to owners of the parent of ¥9,700 million. Revenue is expected to decline 0.9% year on year and operating profit 6.2%. Progress against the full-year forecast in Q1 was approximately 16.3% for revenue and approximately 3.7% for operating profit, a gap of approximately 12.6 percentage points. Since the appropriate Q1 progress rate cannot be judged from these figures alone given seasonality, the simple 50% first-half benchmarks are revenue of ¥57,750 million and operating profit of ¥7,250 million, against which the extent of profit recovery needs to be assessed.

Actual results for the fiscal year ending March 2026 were revenue of ¥116,596 million, operating profit of ¥15,456 million and an operating margin of 13.3%. By contrast, the operating margin implied by the fiscal year ending March 2027 full-year operating profit forecast of ¥14,500 million is approximately 12.6%, meaning the company’s plan itself assumes a modest decline in margin from the previous fiscal year. A substantial improvement in profitability, including in the second half, will be needed to recover from 2.9% in Q1 to 12.6% for the full year. As of Q1, the earnings forecasts had not been revised, so the question is whether higher personnel and other costs can be absorbed while maintaining the plan.

In the second-quarter results, it will be necessary to confirm not only cumulative operating profit but also whether the increase in personnel and other costs slowed from Q1 and whether there was any improvement in price pass-through or product mix. The Q1 disclosure attributed the decline in profit to higher personnel and other costs, but did not provide the amount of the impact or the contribution by unit price and volume. If the full-year forecasts are maintained, it will be important to see whether the required second-half operating profit and the recovery assumptions by segment are presented more specifically at the first-half stage.