Sharp 1Q decline in operating profit puts H1 recovery capacity to meet the full-year forecast in focus

Consolidated operating revenue in 1Q of the fiscal year ending February 2027 was ¥198,026 million, down 1.7% year on year. Operating profit was ¥391 million, ordinary profit was ¥508 million, and net profit attributable to owners of the parent was ¥66 million, down 79.4%, 78.2% and 94.2%, respectively, year on year. Although the company remained profitable, the decline in profit was substantially larger than the decrease in revenue, indicating that deterioration in the gross profit margin outweighed the reduction in operating expenses.

The full-year forecast remains unchanged as of 1Q at operating revenue of ¥825,000 million, operating profit of ¥17,000 million, ordinary profit of ¥17,200 million and net profit of ¥7,000 million. Based on a simple calculation, progress in 1Q was 24.0% for operating revenue and 2.3% for operating profit, a substantial gap between revenue and profit progress. Based on the full-year operating profit forecast, ¥16,609 million must be added over the remaining 9 months after 1Q. However, this is not a company plan adjusted for seasonality, so the H1 results need to be assessed separately in terms of cumulative profit and the recovery required in the second half.

The company attributes the decline in profit to the reversal of the special demand generated by high agricultural commodity prices and rice shortages in the previous year, higher product procurement costs, and a lower gross profit margin resulting from its emphasis on low prices. Selling, general and administrative expenses were down 2.1% year on year, however, and cost reductions alone did not offset the deterioration in gross profit. The supplementary performance materials do not include a bridge showing changes in operating profit by factor or the company’s own assessment of progress against the full-year forecast, and no figures quantify which of prices, volumes or procurement costs will improve in H1.

In H1, attention should be paid not only to cumulative operating revenue, operating profit, ordinary profit and net profit, but also to recovery in the operating margin. In particular, if only the operating revenue progress rate rises while the operating profit progress rate remains low, dependence on the second half to achieve the ¥17,000 million full-year operating profit forecast will increase further. The company operates as a single segment and does not disclose revenue or profit by segment, so it will also be important to see whether the H1 materials add supplementary information such as revenue, gross profit and SG&A expenses by business format.