Profit improves despite lower revenue; sustainability of gross-margin improvement to be tested in FY2027-H1

FY2027-Q1 revenue was ¥6,280 million, down 9.0% year on year, while operating profit rose 10.9% to ¥389 million, ordinary profit rose 17.5% to ¥417 million, and profit attributable to owners of the parent rose 19.0% to ¥136 million. Since operating profit increased despite the contraction in revenue, FY2027-H1 will need to distinguish between a simple reversal of project timing and a fundamental improvement in profitability.

First-quarter operating profit increased by ¥38 million, from ¥351 million in the prior-year quarter to ¥389 million. Supplementary materials showed a ¥168 million decline in gross profit due to lower revenue, a ¥395 million increase in gross profit from improvement in the cost ratio, and a ¥189 million increase in SG&A expenses. In other words, the impact of lower revenue was more than offset by the improvement in the cost ratio, while higher SG&A expenses eroded part of that benefit. It will be important to see whether the same format is used to disclose the respective contributions of these three factors in FY2027-H1.

The gross margin was 33.3%, up 6.3 percentage points year on year, while the operating margin rose 1.1 percentage points to 6.2%. However, the FY2026 full-year gross margin was 31.5%, down 0.4 percentage points year on year, so it cannot yet be said that longer-term pressure from higher raw-material, labor and energy costs has disappeared. In the past, product price revisions and cost reductions supported profit, but the profit contribution from price revisions, changes in raw-material unit prices and the breakdown of the ¥189 million increase in SG&A expenses have not been disclosed.

FY2026-H1 revenue and operating profit were ¥14,187 million and ¥917 million, respectively, providing the comparison base for FY2027-H1. To extend the first-quarter improvement across the first half, the company will need to achieve a recovery in instrumentation systems revenue, continued revenue growth in sensors and limited profit deterioration in measurement and control equipment. In the next earnings release, it will be important to check not only whether first-half revenue and operating profit exceed the prior-year levels, but also the breakdown of the gross margin, SG&A expenses, price-revision effects and cost-reduction effects.