Speaker business: profit plunged on cost and foreign-exchange pressures despite higher revenue

In Q1 of the fiscal year ending March 2027, consolidated revenue was ¥35,097 million, up 9.2% year on year, while operating profit was ¥585 million, down 66.9%. Net income attributable to owners of the parent was ¥128 million, down 91.4%. Based on revenue and operating profit, the operating margin was approximately 1.7%, down approximately 3.8 percentage points from approximately 5.5% in the same period last year. Despite the expansion in revenue, the business converted revenue into profit much less efficiently.

The speaker business was the main source of the deterioration in earnings. First-quarter revenue was ¥28,610 million, up 7.5% year on year, but operating profit was only ¥70 million, down 95.4%. By contrast, for the fiscal year ended March 2026, speaker-business revenue was ¥111,869 million, down 2.3% from the previous fiscal year, while operating profit was ¥6,522 million, up 2.5%. The full-year operating margin was approximately 5.8%, a substantial difference from approximately 0.2% in Q1, indicating that higher sales of high-value-added products alone have not absorbed the current cost burden.

The company explained that expenses related to US tariffs previously paid were recognized when inventory was sold, while raw-material prices rose with higher crude oil and other commodity prices, and foreign-exchange costs increased as the Chinese yuan strengthened. It also said that it expects to recover the impact of US tariffs and higher materials costs through tariff refunds and customer recovery. However, as of Q1, the company had not disclosed the amount by which tariffs, raw materials and foreign exchange each reduced operating profit, or the amount recovered. The financial summary also did not provide a breakdown of gross margin or selling, general and administrative expenses.

In the next earnings release, we will check whether speaker-business operating profit has recovered from ¥70 million and clearly exceeded at least the approximately 0.2% margin recorded in Q1. Key points include whether US tariff refunds have been realized, whether the increase in materials costs has been recovered from customers and reflected in cost of sales, and how much the currency mismatch between yuan-denominated procurement and US dollar sales has been contained through transfers to other sites or foreign-exchange hedging. Unless there are signs of a return toward the approximately 5.8% full-year speaker-business operating margin for the fiscal year ended March 2026, the cost and foreign-exchange risks should be viewed as prolonged rather than the profit benefits of the branded-premium strategy.