Profit recovery lags sales growth — the distance to ¥5,500 million in full-year operating profit

FY2027-Q1 revenue was ¥42,780 million, up 6.3% from ¥40,263 million in the same quarter of the previous year. However, operating profit fell by ¥1,312 million to ¥938 million from ¥2,250 million, and the operating margin declined by approximately 3.4 percentage points, from approximately 5.6% to approximately 2.2%. Ordinary profit was also only ¥763 million, while net income attributable to owners of the parent was just ¥8 million, indicating that higher revenue has not translated into higher profit.

The full-year company forecasts are revenue of ¥167,000 million, operating profit of ¥5,500 million, ordinary profit of ¥3,500 million and net income attributable to owners of the parent of ¥1,500 million. They had not been revised as of FY2027-Q1. Based on simple quarterly progress, revenue had reached 25.6% of the full-year forecast, while operating profit stood at only 17.1%. Although seasonality must be taken into account, whether the company can secure operating profit of around ¥2,750 million and an operating margin in the low 3% range in FY2027-H1 will be a practical benchmark for assessing whether leaving the forecast unchanged is appropriate.

The company attributed the decline in profit to the loss of high-unit-price sales and higher value added from new launches in Japan in the same quarter of the previous year, new-launch costs and tariff-related costs in North and South America, the stronger Mexican peso, one-off costs in Europe, and higher material, energy and labor costs in Asia. However, no bridge has been disclosed showing how many millions of yen each of the tariff costs, incomplete price pass-through, higher material costs and regional launch costs reduced operating profit.

At the next results announcement, it will be necessary to check not only FY2027-H1 operating profit and the operating margin, but also whether one-off costs among the profit-decline factors have fallen away and whether price revisions and tariff-cost recovery have been achieved. If operating profit falls below ¥2,750 million and the operating margin does not improve from around the 2.6% recorded for FY2026, the full-year forecast of ¥5,500 million will be heavily weighted toward the second half, increasing the risk of a forecast revision. Conversely, if the operating margin returns to the 3% range while revenue growth is maintained, this would reinforce the view that the Q1 decline in profit was primarily due to one-off factors.