Profit growth is slowing relative to revenue growth, and first-quarter progress toward the full-year plan is behind schedule

FY2027-Q1 revenue was ¥63,683 million and operating profit was ¥6,735 million. Based on the disclosed figures, revenue increased 2.0% year on year, while operating profit declined 4.8%. The operating margin calculated from revenue and operating profit was approximately 10.6%, down from approximately 11.3% in the same quarter of the previous year. The first point to confirm is that revenue growth has not translated directly into profit growth.

The company’s FY2027 full-year forecasts are revenue of ¥315,000 million, operating profit of ¥49,700 million and profit attributable to owners of the parent of ¥35,300 million. First-quarter progress was approximately 20.2% for revenue and 13.5% for operating profit. Profit progress was weaker than the 25% implied by a simple quarterly allocation. However, the company explains that revenue is concentrated in the second and fourth quarters and that profit is lower in the first and third quarters because of seasonality. Accordingly, it is necessary to confirm recovery in cumulative first-half results rather than simply judging the quarter as below plan.

Factors cited for the decline in profit include growth investments, the reversal of highly profitable projects recorded in the same quarter of the previous year, and increases in personnel and other costs. However, no breakdown has been provided showing how many hundreds of millions of yen each of growth investments, personnel costs and the reversal in project profitability reduced operating profit. Since revenue increased mainly in the domestic and overseas FA markets served by the AA business, the next disclosure should provide a regional and product-level breakdown of revenue growth and distinguish whether the cost increase is temporary or structural.

For FY2027-H1, we will confirm how much revenue has accumulated against the full-year forecast of ¥315,000 million and whether operating profit has recovered to around 25% or more of the ¥49,700 million forecast. We will also assess whether measures such as price pass-through, cost reductions, DX and productivity improvements reversed the first-quarter decline in margin, and whether maintaining the full-year forecast is reasonable. Since IFRS has been applied from the first quarter, the basis for year-on-year comparisons and the adjustments from Japanese GAAP will also need to be confirmed.