Can the recovery in earnings be confirmed in the first half after the revenue increase but operating profit decline in Q1?

FY2027-Q1 revenue was ¥9,015 million, up 7.5% year on year from ¥8,382 million. Operating profit, however, fell 4.2% to ¥564 million from ¥589 million in the same period of the previous year. The operating margin declined by approximately 0.8 percentage points, from approximately 7.0% to approximately 6.3%. Despite revenue growth, both the margin and operating profit deteriorated, making it a key initial question whether this gap will narrow in the first half.

The full-year forecasts are revenue of ¥37,000 million, operating profit of ¥2,000 million, ordinary profit of ¥2,300 million and net profit attributable to owners of the parent of ¥1,700 million, with no revision as of Q1. Q1 progress was approximately 24.4% for revenue, 28.2% for operating profit and 22.1% for net profit. Operating profit is ahead of revenue on a progress basis, but it declined year on year. The cumulative first-half operating-profit progress rate and whether the first-half operating margin improves above 6.3% therefore need to be assessed separately.

In terms of earnings, the precision components business reported higher revenue and profit, while shipments and sales of handheld fans in the household-products business remained weak. Higher component prices and the weaker yen also weighed on operating profit. Although these factors have been explained qualitatively, the company has not disclosed the impact in millions of yen from lower handheld-fan sales volumes, higher component costs and increased procurement costs resulting from foreign-exchange movements. In the first-half results, it will be important to explain separately the effects of price revisions, productivity improvements, product mix and foreign exchange on changes in profit.

Net profit fell 75.1% year on year to ¥376 million because of the absence of gains on the sale of fixed assets and gains on liquidation of a subsidiary recorded in the previous year, but this is a separate issue from operating profitability. Next time, the improvement in operating profit and the impact of extraordinary income and losses should be separated to assess the likelihood of achieving full-year operating profit of ¥2,000 million. In particular, we will track how much operating profit can build on the Q1 result of ¥564 million in the first half and whether the rationale for maintaining the full-year forecast is explained with supporting figures.