Profit growth despite lower revenue depends on improved inventory sales spreads, making earnings repeatability the key focus.

FY2026-H1 revenue was ¥2,275.6 million, down ¥373.5 million, or 14.1%, from ¥2,649.1 million in the same period of the previous year. Operating profit, however, rose by ¥4.3 million from ¥14.8 million to ¥19.1 million, while ordinary profit increased from ¥21.9 million to ¥25.4 million and interim net profit attributable to owners of the parent rose from ¥11.2 million to ¥13.1 million. The simultaneous contraction in revenue and increase in profit is the most important point to verify in the next results release.

The operating margin is not directly disclosed on the cover page, but calculation from the disclosed figures shows that it rose from approximately 0.56% in the same period of the previous year to approximately 0.84% in FY2026-H1. Progress against the full-year operating profit forecast of ¥44.0 million was 43.4%, below the simple time-elapsed benchmark of 50%, although the company secured ¥19.1 million in operating profit in the first half alone. The difference between first-quarter operating profit of ¥13.9 million and first-half operating profit was only ¥5.2 million on a simple subtraction basis, making it difficult to say that second-quarter profit made a substantial contribution.

The company cites improved sales spreads on inventory following price increases as the main reason for the increase in profit. However, the FY2026-H1 earnings report does not quantify the profit contribution from the spread improvement, the breakdown between sales volume and unit prices, or the current-period gross profit margin. In previous periods of steel-price volatility, wider sales spreads supported profit, while spread contraction and inventory valuation losses during price adjustments pressured operating profit. Additional verification is therefore needed before treating the current profit growth as a structural improvement in earnings power.

For FY2026-Q3, operating profit of ¥33.0 million and revenue of ¥3,825.0 million are reference points based on simple 75% progress. In steel distribution, however, quarterly profit is prone to fluctuate depending on the timing of price pass-through and inventory valuation. We will monitor whether the cumulative third-quarter margin can remain around 0.8% and whether improved sales spreads are absorbing not only lower volumes but also manufacturer price increases and higher logistics costs.