Revenue growth but lower operating profit; restoring cost absorption is the focus for the first half

The first quarter generated revenue of ¥4,185 million, up ¥209 million, or 5.2%, from ¥3,976 million in the same period a year earlier. Operating profit, meanwhile, fell ¥58 million to ¥235 million from ¥293 million, a 19.9% decline. Because operating profit fell despite revenue growth, the results suggest that the key issue this quarter was not the presence or absence of demand, but the company’s weaker ability to convert higher revenue into profit.

The operating margin fell approximately 1.8 percentage points, from approximately 7.4% in the same period a year earlier to approximately 5.6% in the current period. For FY2026 as a whole, the operating margin was also only approximately 6.7%, with revenue of ¥17,256 million and operating profit of ¥1,158 million, down significantly from approximately 9.9% in FY2025, when revenue was ¥16,790 million and operating profit was ¥1,663 million. Accordingly, in the next first-half results, it will be necessary to check not only whether revenue exceeds the year-earlier level, but also whether the operating margin has improved from the first-quarter level of 5.6%.

For the first quarter, the company cited price pass-through for higher raw materials and logistics costs, cost reductions and foreign-exchange gains from the weaker yen as factors affecting performance. However, it has not disclosed the amount of profit improvement from price pass-through, the effect of cost reductions, or the increase in labor and materials costs. In its FY2026 full-year results briefing, the company identified higher materials prices of ¥489 million and higher labor and other expenses of ¥450 million as factors weighing on operating profit, but no equivalent breakdown is available for the first quarter of FY2027 ending March 2027. Whether this breakdown is provided in the next results announcement will be important.

The full-year forecasts remain unchanged at revenue of ¥18,000 million and operating profit of ¥1,500 million. First-quarter progress was approximately 23.3% for revenue and only approximately 15.7% for operating profit, indicating that profit is lagging revenue. First-half operating profit of ¥750 million is not the company’s forecast itself, but it is a practical benchmark for assessing whether full-year operating profit can be achieved as forecast. If the company falls short of this level in the first half, the plan will depend on a substantial improvement in profit in the second half.

The first quarter did not include details of gross profit margin, cost of sales or SG&A expenses, so the financial figures alone do not show whether volume, pricing, materials, labor or logistics costs was the largest factor behind the decline in operating profit. In the next results announcement, priority checks will include the recovery in operating margin, the sustainability of price pass-through, increases in materials and labor costs, the amount of cost reductions and segment-level profit margins.