Can a return to profitability with higher revenue be repeated in the third quarter?

Consolidated revenue for the interim period was ¥1,782.7 million, an increase of ¥175.6 million, or 10.9%, from ¥1,607.2 million in the same period a year earlier. Operating profit was ¥83.4 million, an improvement of ¥140.8 million from the operating loss of ¥57.4 million recorded in the same period a year earlier. The operating margin rose by approximately 8.3 percentage points, from approximately negative 3.6% to approximately 4.7%. The return to profitability reflected not only higher revenue but also improved profitability and lower fixed costs.

Revenue in the first quarter was ¥820.8 million and operating profit was ¥24.2 million, while cumulative operating profit for the interim period expanded to ¥83.4 million. Subtracting the first quarter from the interim-period cumulative figures gives second-quarter standalone revenue of ¥961.9 million and operating profit of ¥59.2 million. Applying the same calculation to the prior-year period gives second-quarter standalone revenue of ¥823.3 million and operating profit of ¥2.1 million, suggesting that higher revenue and improved profitability in the second quarter drove the first-half return to profitability.

By business, interim-period revenue in the electronic circuit board business was ¥1,323 million and segment profit was ¥295 million, increases of 14.1% and 38.7%, respectively, year on year. The mirror polishing machine business also reported revenue of ¥198 million and segment profit of ¥40 million, with profit up 24.0%. Meanwhile, the test system business recorded revenue of ¥193 million and a segment loss of ¥33 million, while the industrial machinery system business recorded revenue of ¥67 million and a loss of ¥5 million, meaning that the foundation for the return to profitability remains concentrated in certain businesses.

The company identifies lower personnel expenses from recruiting voluntary retirees and other measures, along with higher gross margins in the electronic circuit board, test system and mirror polishing machine businesses, as factors behind the improvement in profit, but has not disclosed the amount of the personnel-expense reduction or the profit contribution of each factor. Early-retirement incentive payments of ¥8.570 million were recorded in the first quarter and ¥8.727 million on a cumulative interim-period basis. Structural fixed-cost reductions therefore need to be assessed separately from additional one-time costs. In the third quarter, the key points will be whether the operating margin can remain at 4.7%, whether higher electronic circuit board revenue and higher gross margins in the three businesses continue, and whether the company provides a quantitative explanation of the reduction in personnel expenses.