In Q1, revenue is ahead of plan, while operating profit is behind the full-year target, making H1 the point at which to assess whether the earnings improvement is repeatable

Q1 revenue for the fiscal year ending March 2027 was ¥37.215 billion, down 6.7% year on year, while operating profit was ¥1.404 billion, up 3.6%, and ordinary profit was ¥1.192 billion, up 73.8%. Net profit attributable to owners of the parent was ¥54 million, turning profitable from a loss in the same quarter of the previous year. The full-year forecasts are revenue of ¥140.9 billion, operating profit of ¥7.0 billion, ordinary profit of ¥5.2 billion and net profit of ¥2.5 billion, with Q1 progress rates of 26.4%, 20.1%, 22.9% and 2.2%, respectively.

The decline in revenue was largely attributable to a ¥4.7 billion reduction resulting from lower production volumes following the consolidation of US production into one plant. In contrast, higher or lower orders outside the US contributed ¥300 million to revenue, price movements contributed ¥600 million and foreign exchange contributed ¥1.1 billion, limiting the overall revenue decline to ¥2.7 billion. For operating profit, the consolidation of US production into one plant contributed ¥400 million, rationalisation ¥300 million, price movements, including the reflection of changes in selling prices, ¥300 million, and foreign exchange translation differences ¥100 million as improvement factors. These were offset by order fluctuations and mix changes of ¥300 million, labour costs of ¥500 million and expenses of ¥200 million as factors reducing profit.

Accordingly, the issue this time is not simply higher revenue and lower profit, but the combination of structural reform that intentionally reduces the scale of revenue and a policy of improving margins through price pass-through and rationalisation. As of Q1, revenue progress was above one-quarter of the full-year forecast, while operating profit progress remained at one-fifth. As the company has not revised its full-year forecasts, the key points for H1 will be how far cumulative operating profit progress rises from 20.1% and whether increases in labour costs and expenses can continue to be absorbed by rationalisation from Q2 onward.

The increase in ordinary profit also includes a shift from foreign exchange losses to foreign exchange gains, so operating improvement needs to be assessed separately from financial and foreign exchange factors. In H1, it will be necessary to determine whether the increase in operating profit is driven by price pass-through and productivity improvements or depends on non-operating factors such as foreign exchange gains. In addition, the earnings presentation does not disclose gross profit margin, operating margin or the amount of selling, general and administrative expenses, making any additional disclosure of margins or the cost structure in H1 another item to monitor.