Revenue recovery has yet to translate into earnings recovery

First-quarter consolidated revenue was ¥16,220 million, an increase of ¥446 million from ¥15,774 million in the same period of the previous year. However, operating profit fell by ¥32 million, from ¥39 million to ¥7 million, and the operating margin declined by approximately 0.20 percentage points, from approximately 0.25% to approximately 0.04%. Ordinary income also shifted from a profit of ¥428 million in the same period of the previous year to a loss of ¥87 million, while profit attributable to owners of the parent shifted from a profit of ¥352 million to a loss of ¥119 million. Revenue growth alone does not explain the earnings recovery.

On the revenue side, the recovery in sales at the New Zealand subsidiary, which had been weak in the same period of the previous year, boosted consolidated revenue. In Japan, however, housing starts remained sluggish and costs stayed high, while the price revisions for orders received from 22 June were not yet fully reflected in first-quarter results. In New Zealand, income from the sale of emissions credits recorded in the same period of the previous year fell away, foreign exchange gains also declined, and higher fuel costs in the power generation business pressured operating profit. The impact of these factors was not disclosed for the first quarter, so it will be important to see whether the first-half results separately show the contribution from price revisions and the cost burden.

The company maintained its FY2027 full-year forecasts of ¥65,000 million in revenue, ¥1,200 million in operating profit, ¥600 million in ordinary profit and ¥400 million in profit attributable to owners of the parent. Revenue progress was approximately 25.0% at the end of the first quarter, but operating profit progress was only approximately 0.6%, while ordinary income and net income were negative. On a simple even-progress basis, ¥32,500 million in revenue and ¥600 million in operating profit would be benchmarks for the first half, but the company has not explicitly stated these figures as its first-half plan. At the next results announcement, it will be necessary to assess not only cumulative performance, but also whether the recovery in operating profit is attributable to price revisions, volume, foreign exchange or fuel costs.