First-half operating profit reached 67.5% of the full-year forecast, but the hurdle for the unchanged second-half forecast warrants scrutiny

Cumulative second-quarter revenue was ¥34,566 million, operating profit was ¥2,294 million, ordinary profit was ¥2,148 million, and interim net profit attributable to owners of the parent was ¥1,417 million. The full-year forecasts are revenue of ¥68,000 million, operating profit of ¥3,400 million, ordinary profit of ¥3,300 million, and net profit of ¥2,350 million, putting progress at 50.8%, 67.5%, 65.1%, and 60.3%, respectively. The fact that profit is running ahead of revenue is a point to monitor in the third quarter.

The amounts remaining against the full-year forecasts are revenue of ¥33,434 million, operating profit of ¥1,106 million, ordinary profit of ¥1,152 million, and net profit of ¥933 million. Reports on the second-quarter results briefing put the first-half achievement rates against the full-year forecasts at 105% for revenue, 143% for operating profit, 139% for ordinary profit, and 123% for interim net profit, while the company has not revised its full-year forecasts. It will be important to determine whether the reason for not reflecting the first half’s upside in the full-year forecasts is a conservative view of second-half raw-material prices and supply constraints.

As a monitoring benchmark for the cumulative third quarter, a simple allocation of the full-year forecasts over three quarters gives revenue of ¥51,000 million and operating profit of ¥2,550 million. However, these are merely reference figures, not quarterly plans disclosed by the company, and do not reflect seasonality or business-specific revenue recognition. In the third-quarter results, it will be necessary to assess not only the variance from the simple allocation, but also year-on-year revenue and operating profit, the amounts still required to meet the full-year forecasts, and whether the forecasts have been revised.

Although operating profit progress was high as of the second quarter, operating profit growth was only 3.2% year on year, so the lead in profit does not necessarily indicate a sustainable improvement in earning power. In the third quarter, we will track whether cumulative operating profit exceeds ¥2,550 million, whether margins can be maintained relative to revenue growth, and whether the company provides additional information on the likelihood of achieving its ¥3,400 million full-year operating profit forecast.