Profit is slowing relative to revenue growth, making FY2027-H1 a period for confirming profitability improvement

FY2027-Q1 revenue was ¥1,913.868 billion, up 9.1% year on year. Increased vehicle sales and expanded sales of electrification and intelligent products contributed to higher revenue, while operating profit was ¥84.178 billion, down 21.5%, and profit for the quarter attributable to owners of the parent was ¥67.875 billion, down 14.4%. Revenue growth has not flowed through to profit, clearly resulting in higher revenue but lower profit.

FY2026 full-year revenue was ¥7,539.975 billion, operating profit was ¥552.538 billion, and the operating margin was 7.3%. By contrast, the FY2027 full-year forecast calls for revenue of ¥7,750.0 billion and operating profit of ¥500.0 billion. Revenue is expected to increase 2.8%, while operating profit is expected to decline 9.5%, bringing the forecast operating margin down to approximately 6.5%. Q1 progress was approximately 24.7% for revenue and 16.8% for operating profit, indicating that profit is ramping up more slowly than revenue on a simple quarterly allocation.

The company cited higher material costs and stronger investment for future growth as factors behind lower profit, despite the positive impact of the weaker yen. However, the Q1 earnings summary did not disclose a factor-by-factor monetary bridge for higher copper and aluminum prices, rationalization, vehicle sales and growth investment, or the proportion of revenue represented by electrification and intelligent products. In FY2027-H1, using H1 revenue of ¥3,875.0 billion and operating profit of ¥250.0 billion as simple progress benchmarks, we will assess how much price pass-through and rationalization offset higher costs and the likelihood of maintaining the full-year operating profit forecast of ¥500.0 billion.