Profit progress is lagging the full-year plan through the first 3 quarters, increasing reliance on Q4 to return to profitability

Revenue for the first 3 quarters was ¥12,494 million, down 0.3% year on year, operating profit was ¥185 million, down 21.9%, and ordinary profit was ¥114 million, down 37.9%. The operating margin was approximately 1.48%, down about 0.4 percentage points from approximately 1.89% in the same period last year. While revenue was essentially flat, operating profit and ordinary profit declined substantially, bringing the company to a point where its earnings power needs to be assessed.

The full-year forecasts remain unchanged at revenue of ¥18,000 million, operating profit of ¥300 million, ordinary profit of ¥250 million and net income attributable to owners of the parent of ¥100 million. Progress through the first 3 quarters was 69.4% for revenue, 61.7% for operating profit and 45.7% for ordinary profit, indicating that profit is progressing more slowly than revenue. Ordinary profit in particular must reach 54.3% of the full-year plan during the remaining 25% of the period, so it is necessary to determine whether the forecast assumes not only normal seasonality but also the completion of cost increases or a reversal of one-off expenses.

On a simple calculation, the company must record revenue of ¥5,506 million, operating profit of ¥115 million, ordinary profit of ¥136 million and profit attributable to owners of the parent of ¥112 million in Q4 to meet the full-year forecasts. The company recorded a ¥12 million net loss for the first 3 quarters. It is also important that no profit remained at the final stage, including tax expenses and non-operating and extraordinary gains and losses, despite operating profit and ordinary profit being positive. Extraordinary losses for the first 3 quarters were limited to items such as a ¥1,250 thousand provision for doubtful accounts, so the recovery in final profit will require not only higher operating profit but also close monitoring of the tax burden and non-operating expenses.

At the next full-year results announcement, a key focus will be whether the company discloses standalone Q4 revenue, operating profit, ordinary profit and net income in a format comparable with the same quarter of the previous year. In its third-quarter presentation materials, the company cited stronger earnings power in existing businesses, a review of its cost structure and solid performance in staffing for logistics and manufacturing as factors, but did not provide amounts by factor. Even if the full-year forecast is achieved, it will be necessary to distinguish whether this is due to higher revenue, lower selling, general and administrative expenses or a reversal of one-off costs.