Revenue up, but operating profit halved; progress toward the full-year earnings plan is the key focus

First-quarter revenue was ¥21,872 million, up 1.3% year on year, while operating profit was ¥239 million, down 49.0%. The operating margin was 1.09% based on a simple calculation, down approximately 1.08 percentage points from approximately 2.17% in the same quarter of the previous year. With revenue essentially flat, profit has halved, making a bottoming-out in the margin more important than the sustainability of revenue growth in FY2027-H1.

The full-year forecasts are revenue of ¥100,000 million and operating profit of ¥2,300 million. Accordingly, first-quarter progress was 21.9% for revenue versus 10.4% for operating profit, showing that earnings are clearly lagging. Using a simple half-year allocation as a benchmark, first-half cumulative revenue of ¥50,000 million and operating profit of ¥1,150 million would serve as reference points. Based on first-quarter operating profit of ¥239 million, standalone second-quarter operating profit would need to be ¥911 million. This is not the company's first-half forecast, but rather a benchmark for checking mechanical progress of 50% toward the full-year plan.

The company attributed the increase in revenue to growth in Industrial Materials, while citing difficulties in Electronics & Devices due to competition from Chinese companies and higher selling expenses in Building Materials aimed at future growth as factors behind the decline in operating profit. However, no bridge has been disclosed showing by how many millions of yen each of pricing, volume, raw material and logistics costs, and selling expenses reduced operating profit. In the second quarter, the focus will be on confirming the operating margin, the increase in selling, general and administrative expenses or selling expenses, and the recovery in profit by segment on a numerical basis.