Revenue growth absorbed by higher raw material costs and delayed price pass-through

Revenue in Q1 FY2027 was ¥5,933 million, up 7.3% from ¥5,531 million in the year-earlier period. Growth in products for vehicle models that began mass production in the second half of the previous fiscal year supported the increase in revenue, but operating profit fell 24.1% to ¥33 million from ¥44 million. Operating margin, calculated simply from revenue and operating profit, was only 0.56%, approximately 0.24 percentage points below the roughly 0.80% recorded a year earlier.

At the lower levels of the income statement, ordinary profit fell 68.9% to ¥12 million from ¥40 million, while quarterly net income attributable to owners of the parent swung from a ¥12 million profit to an ¥18 million loss. Accordingly, the focus should be not only on revenue growth, but also on how much of the incremental revenue reaches operating profit and whether the company can secure a net profit after non-operating income and expenses and taxes.

The company cited higher raw material prices resulting from the situation in the Middle East and a timing mismatch in passing price increases through to selling prices as factors behind the decline in profit. It also said it was working to reduce costs and expenses, but it has not disclosed the amounts by which higher raw material costs, price pass-through, cost reductions and expense reductions affected the ¥33 million operating profit. The full-year FY2026 operating margin also declined to 1.6% from 2.2% in the previous fiscal year. The 1H margin should show whether this is a short-term issue or an ongoing deterioration in profitability.

The full-year forecasts remain unchanged at revenue of ¥24,300 million, operating profit of ¥520 million, ordinary profit of ¥430 million and net income of ¥320 million. At the end of Q1, progress was 24.4% for revenue versus 6.3% for operating profit, indicating that profit is building more slowly than revenue. For 1H, ¥12,150 million of revenue and ¥260 million of operating profit, mechanically equivalent to 50% of the full-year forecasts, provide reference points. The results should show whether year-on-year revenue growth is accompanied by a recovery in profit.