Sales growth failed to translate into profit as procurement costs rose

FY2027-Q1 revenue increased 5.8% year on year to ¥397,774 million, while operating profit fell to ¥2,465 million from ¥3,842 million in the year-earlier quarter. The operating margin, calculated simply, was approximately 0.62%, down approximately 0.40 percentage points from approximately 1.02% in the year-earlier quarter. This is a typical margin squeeze, with profit declining despite expanding sales, indicating weaker conversion of sales into profit rather than merely insufficient demand.

In the core pharmaceutical wholesaling business, revenue increased 6.2% year on year to ¥384,570 million, while segment profit fell 25.1% to ¥3,110 million. The company attributed growth to products such as anticancer drugs and specialty pharmaceuticals, but said that higher procurement costs for pharmaceuticals pressured profit. The dispensing pharmacy business also saw revenue rise 1.5% to ¥24,977 million while segment profit fell 38.8% to ¥113 million, indicating that pressure on consolidated profit was not confined to the wholesaling business.

The company forecasts FY2027 revenue of ¥1,601,000 million and operating profit of ¥14,800 million, representing a 3.1% year-on-year increase in revenue and a 10.9% decline in operating profit. As of Q1, progress was approximately 24.8% for revenue and approximately 16.7% for operating profit, meaning profit was progressing more slowly than revenue. Based on a simple even half-year allocation, H1 revenue of ¥800,500 million and operating profit of ¥7,400 million would be benchmarks, but seasonality must be taken into account, so improvement in the year-on-year profit margin should also be monitored rather than focusing only on absolute amounts.

Q1 also indicated a 4.02% reduction in drug prices on a drug-cost basis resulting from the April 2026 drug price revision, but the impact of higher procurement costs, the amount absorbed through price negotiations, changes in gross margin and an operating profit bridge by factor were not disclosed. In FY2027-H1, it will be necessary to assess specifically whether the impact of the drug price revision has run its course, whether procurement terms with pharmaceutical companies and price negotiations with medical institutions have improved, and whether the full-year operating profit forecast of ¥14,800 million can be maintained.