Cost pressures are preventing revenue growth from translating into operating profit

Consolidated revenue in the first quarter of the fiscal year ending March 2027 was ¥10,575.744 million, up 12.8% from ¥9,376.622 million in the same period of the previous year. However, operating profit swung from ¥70.448 million in the same period of the previous year to an operating loss of ¥11.307 million. The operating margin declined by 0.86 percentage points, from approximately 0.75% to approximately negative 0.11%, indicating that profitability has not improved in line with revenue growth.

The company said sales increased across all four areas, communications, automotive, consumer and industrial, but that the increase in revenue was insufficient to absorb higher gold prices, material costs, selling, general and administrative expenses, and fixed costs. Although the direction of cost increases has been indicated, no quantitative operating profit bridge has been disclosed showing the impact of gold prices, unit price differences in materials, the increase in fixed costs or changes in gross profit attributable to product mix.

The full-year forecast for the fiscal year ending March 2027 calls for revenue of ¥41,000 million and operating profit of ¥1,400 million. The plan assumes a 23.6% increase in operating profit from ¥1,133 million in the fiscal year ended March 2026, implying a full-year operating margin of approximately 3.41%. This is 0.54 percentage points above the approximately 2.87% margin recorded in the fiscal year ended March 2026, so the company will need to restore its ability to absorb costs from the first half, rather than rely solely on revenue growth.

At the next second-quarter earnings announcement, the minimum point to verify for a return to cumulative first-half profitability will be whether standalone second-quarter operating profit can exceed the ¥11.307 million operating loss recorded in the first quarter. In addition, it will be necessary to determine whether the increase in revenue resulted from higher volumes, price revisions or product mix, and how much each of gold prices, material costs and fixed costs reduced operating profit.