Revenue up, operating profit down: Can profit recovery be demonstrated in the second half?

Revenue for January-June FY2026 was ¥82,509 million, up 3.4% year on year, while operating profit was ¥1,294 million, down 14.1%, ordinary profit was ¥1,729 million, down 6.9%, and interim net profit attributable to owners of the parent was ¥972 million, down 2.3%. Revenue growth did not translate into profit growth. The operating margin fell by approximately 0.32 percentage points, from approximately 1.89% in the same period last year, calculated as ¥1,507 million divided by ¥79,779 million, to approximately 1.57% in the current interim period.

By quarter, first-quarter revenue was ¥41,698 million and operating profit was ¥874 million. Subtracting these figures from the first-half cumulative results gives second-quarter revenue of approximately ¥40,811 million and operating profit of approximately ¥420 million, indicating a sharp slowdown in profit from the first quarter. In addition, selling, general and administrative expenses increased 5.1% year on year, suggesting that higher fixed costs and expenses, including personnel costs, absorbed the benefit of revenue growth.

The full-year forecasts remain unchanged at revenue of ¥165,000 million, operating profit of ¥3,400 million, ordinary profit of ¥4,100 million and net profit of ¥2,100 million. Simply subtracting the first-half results means that the second half requires revenue of ¥82,491 million and operating profit of ¥2,106 million, equivalent to approximately 61.9% of the full-year operating profit forecast. Compared with first-half operating profit of ¥1,294 million, this assumes that more than 1.6 times that amount will be generated in the second half alone. In Q3, it will therefore be necessary to confirm a recovery in project recognition, improved margins and restraint in the growth of SG&A expenses at the same time.

At the next earnings release, we will want to confirm nine-month cumulative operating profit and progress against the full-year target of ¥3,400 million, Q3 standalone operating margin, and whether the full-year forecast is maintained or revised. The H1 earnings summary did not disclose cash flow figures such as cash flow from operating activities, so whether profit recovery is translating into working capital and cash generation will also be an issue to monitor if additional disclosure is provided.