1Q delivered double-digit profit growth, but 2Q will test the extent of reliance on asset-sale gains

FY2027-Q1 revenue was ¥388,407 million, up 11.7% year on year, operating income was ¥46,303 million, up 31.1%, ordinary income was ¥51,057 million, up 36.9%, and net income attributable to owners of the parent was ¥35,129 million, up 59.1%. Operating income grew faster than revenue, and the operating margin improved by approximately 1.8 percentage points, from about 10.2% in the year-earlier period to approximately 11.9%. On the figures alone, progress against the full-year net income forecast of ¥123,000 million was 28.6%, representing a strong start for 1Q.

Segment profit was ¥8,111 million for Domestic Business, ¥4,963 million for Overseas Business, ¥3,282 million for Social Infrastructure, ¥12,233 million for Transport, ¥7,395 million for Mobility, and ¥1,368 million for Corporate Investment. Transport was particularly strong, increasing 245.4% year on year, with its ¥8.7 billion increase accounting for a substantial portion of the overall improvement in profit. Overseas Business, Social Infrastructure, and Mobility also posted higher profit, while Corporate Investment declined 12.5% year on year, leaving variation across segments.

The company cited gains on aircraft disposals and vessel sales as the drivers of higher profit in Transport, and earnings growth at CSI in Overseas Business. Accordingly, caution is needed before treating 1Q operating income of ¥46.3 billion as a recurring earnings level. It will be necessary to determine whether aircraft and vessel sale proceeds recur in 2Q or whether they can be offset by recurring earnings from CSI and the joint investment business.

The company did not prepare a cash flow statement for 1Q, and operating cash flow was not disclosed. In the first-half results, we will look for whether the increase in profit, including asset-sale gains, translated into cash flow, including operating cash flow, investing cash flow, and proceeds from asset sales. At a minimum, whether net income exceeds ¥61.5 billion, half of the full-year forecast, and whether higher profit in Transport and Overseas Business can be explained without relying solely on one-off earnings will determine the assessment of the results.