The key test is profit recovery in FY2027-H1 from an operating loss

Consolidated revenue in the first quarter of the fiscal year ending March 2027 was ¥237,889 million, down only 0.4% from ¥238,920 million in the same period of the previous year. However, operating profit turned from a profit of ¥3,726 million in the previous year to an operating loss of ¥921 million, a deterioration of ¥4,647 million. Ordinary profit remained positive at ¥110 million, but the quarterly net loss attributable to owners of the parent was ¥3,586 million. With revenue remaining broadly unchanged while operating profit reversed into a loss, the next results should be assessed primarily for changes in product mix, costs, price pass-through and capacity utilization rather than demand levels.

In the first quarter, the company recorded extraordinary income of ¥52 million against extraordinary losses of ¥363 million, including an impairment loss of ¥35 million. The impairment loss comprised ¥6 million in the Components business, ¥5 million in the Sensors and Communications business and ¥23 million in the Mobility business. Although the amount itself is small relative to consolidated revenue of ¥237,889 million, as earnings-structure reforms in the Mobility business and the disposal of low-profit products progress, additional disposals and impairment of fixed assets could depress net profit through non-operating and extraordinary gains and losses. In FY2027-H1, the key point will be whether impairment and losses on the disposal or sale of fixed assets remain one-off, reviewed by product and site.

The company plan calls for full-year revenue of ¥1,045,000 million, operating profit of ¥48,500 million, ordinary profit of ¥45,500 million and net profit attributable to owners of the parent of ¥30,000 million. There was no revision to the earnings forecast as of the first quarter. A mechanical benchmark based on half of the full-year forecast would be first-half revenue of ¥522,500 million and first-half operating profit of ¥24,250 million. After deducting first-quarter results, second-quarter revenue of ¥284,611 million and operating profit of ¥25,171 million would be required. These are not quarterly forecasts provided by the company, but they provide a benchmark for the hurdle required to maintain the full-year plan.

Accordingly, at the next results announcement, it will not be sufficient to look only at the year-on-year change in cumulative first-half results. It will be necessary to check whether operating profit turns positive in the second quarter alone, whether cumulative first-half operating profit approaches ¥24,250 million, and how much impact higher memory and raw-material prices continues to have. It will also be important to see whether additional disclosure is provided on foreign-exchange gains and losses, extraordinary gains and losses, and impairment losses, which explain the gap between revenue, operating profit, ordinary profit and net profit.