Q1 was clearly behind the full-year plan, making a recovery demonstration in FY2027-H1 necessary

Revenue for the first quarter of the fiscal year ending March 2027 was ¥3,610.658 million, down ¥475.125 million from ¥4,085.783 million in the same period of the previous year. Progress against the full-year revenue forecast of ¥21,000 million was approximately 17.2%, ¥1,639.342 million below the ¥5,250 million implied by a simple assumption of 25% progress each quarter. Seasonal factors and differences in the timing of revenue recognition mean that full-year underperformance cannot be determined solely from this comparison, but as of Q1 the company was clearly behind plan.

In terms of earnings, Q1 operating loss was ¥142.593 million, while the full-year operating profit forecast is ¥1,400 million. Accordingly, achieving the forecast will require total operating profit of ¥1,542.593 million over the three quarters from Q2 through the fiscal year-end. Q1 net loss attributable to owners of the parent was also ¥178 million, meaning that ¥1,078 million in profit will need to be secured over the remaining period against the full-year net profit forecast of ¥900 million. Whether operating income can return to positive territory at least by FY2027-H1 will be the first milestone in assessing the feasibility of the full-year plan.

The company cited delays in construction schedules and the resulting shift in the timing of revenue recognition as factors behind the Q1 decline. In China, it had also planned from the outset to reduce production and sales volumes in order to prioritise a transformation of its business structure. Thus, while the entire Q1 decline may not indicate a loss of demand, the disclosed figures alone do not allow the effects of a mere timing shift in revenue recognition to be separated from the structural decline in volumes in the China business. Since no factor-by-factor financial bridge or order intake and order backlog figures have been disclosed, FY2027-H1 will need to establish not only whether revenue recovers, but also whether the recovery is supported by orders and deliveries.

On a simple half-year progress basis, cumulative FY2027-H1 revenue of ¥10,500 million and operating profit of ¥700 million would be reference benchmarks. However, these are not half-year targets disclosed by the company, but reference figures obtained by mechanically dividing the full-year forecasts in half. More important is whether operating income turns positive on a cumulative Q2 basis and demonstrates that the delay in Q1 revenue recognition has actually been resolved. If revenue increases in Q2 but operating income remains negative, the possibility remains that higher raw-material prices and logistics costs are offsetting the recovery in revenue.

At the Q1 results announcement, the forecasts of ¥21,000 million in full-year revenue, ¥1,400 million in operating profit, ¥1,450 million in ordinary profit and ¥900 million in net profit were left unchanged, as was the annual dividend forecast of ¥36. Although the company expects a recovery, Q1 progress was weak in both revenue and earnings. In FY2027-H1, the company’s unchanged full-year forecasts will need to be assessed from three perspectives: orders, revenue-recognition timing and margins, to determine whether they remain appropriate or whether the revenue and operating profit forecasts need to be revised.