Can operating profit growth continue despite lower revenue, driven by price increases and cost improvements?

Consolidated revenue in the first quarter of the fiscal year ending March 2027 was ¥33,985 million, down ¥884 million, or 2.5%, from ¥34,869 million in the same period of the previous year. Operating profit, meanwhile, was ¥1,893 million, up ¥729 million from ¥1,164 million, representing growth of 62.6%. The operating margin rose 2.3 percentage points from approximately 3.3% to 5.6%, while the gross margin also improved by 2.1 percentage points year on year to 36.6%. With revenue yet to recover, only margins have improved, making it important in the first-half results to determine whether the improvement is temporary or will continue as the combined effect of pricing, manufacturing and fixed-cost factors.

Revenue from the domestic business was ¥28,804 million and operating profit was ¥1,133 million, up 35.4% year on year. The factors affecting domestic profit were a ¥480 million positive impact from revenue, a ¥40 million negative impact from manufacturing fixed costs related to changes in inventories, a ¥100 million negative impact from materials and energy costs, an approximately neutral impact from logistics costs, and a ¥30 million negative impact from fixed costs, for a total profit increase of ¥290 million. Price increases generated a positive revenue effect that exceeded higher costs, but cost factors alone still had a negative impact of ¥170 million. The first-half results should therefore be reviewed at the same level of detail for materials prices, energy, logistics costs and fixed costs.

The combination of sales volume and unit price will also be a point of verification. The presentation materials cite sales volume of 3,711 thousand tsubo and a selling price of ¥4,576 per tsubo for ceramic siding, while also listing the company's ceramic siding sales volume as a key KPI at 3,498 thousand tsubo. The scope and aggregation definitions may differ, so the first-half materials should be checked to determine how much of the decline in volume was offset by price increases and whether the selling price rose from ¥4,576 per tsubo.

The full-year forecasts remain unchanged at revenue of ¥141,000 million and operating profit of ¥9,600 million. First-quarter operating profit progress was 19.7%, below the 24.1% progress for revenue, making it a key focus whether profit progress catches up with revenue progress in the first half. The first-half results should be reviewed on a monetary basis to determine whether the operating margin can remain at 5.6%, whether the domestic pricing effect will exceed the decline in sales volume, and whether the negative impact of materials and energy costs will diminish.