Q1 operating profit is ahead of schedule; the first-half results will show whether this is consistent with the full-year plan for a decline in profit

First-quarter revenue was ¥15,586 million, up 7.7% year on year, while operating profit was ¥434 million, up 32.2%. Ordinary profit was ¥489 million and net income attributable to owners of the parent was ¥312 million, meaning that ordinary profit and net income, as well as operating profit, exceeded the year-earlier levels. The company has not changed its full-year earnings forecasts, so as of now the first-quarter profit growth has not been reflected in an upward revision to the full-year plan.

Calculated mechanically against the full-year forecasts, revenue progress was ¥15,586 million ÷ ¥59,500 million, or 26.2%, while operating profit progress was ¥434 million ÷ ¥980 million, or 44.3%. Operating profit progress was 18.1 percentage points ahead of revenue progress, and the quarterly operating margin was approximately 2.8%. By contrast, the full-year forecast implies an operating margin of approximately 1.6%, based on ¥980 million ÷ ¥59,500 million. The first-half results will therefore need to be used to assess whether the plan assumes a decline in the operating margin in the second half or incorporates seasonality.

The full-year forecast calls for revenue of ¥59,500 million, up 1.4% from the previous fiscal year, against operating profit of ¥980 million, down 21.7%, ordinary profit of ¥1,200 million, down 17.9%, and net income of ¥830 million, down 14.9%. First-quarter results alone indicate that profit is running ahead of plan, but the company has cited risks including inflation, logistics and labor costs, raw-material prices and foreign exchange. It will therefore be important to determine whether the early profit outperformance fades in the first half.

Using 50% progress for the first half as an analytical benchmark, the checkpoints are revenue of ¥29,750 million, operating profit of ¥490 million and net income of ¥415 million. A simple calculation based on first-quarter results indicates that securing quarterly revenue of ¥14,164 million and operating profit of ¥56 million in the second quarter would bring operating profit to the 50% line. However, this is a comparison benchmark derived from the full-year forecast, not a first-half plan provided by the company. At the next results announcement, we will review the first-half cumulative results, any revisions to the full-year forecasts and the assumptions for the second-half operating margin.