Profit progress in FY2027 Q1 is behind the full-year plan

Operating revenue in the first quarter of the fiscal year ending March 2027 was ¥58,654 million, down 6.7% year on year. Operating profit and ordinary profit were each ¥1,332 million, down 57.9%, while quarterly net profit attributable to owners of the parent was ¥563 million, down 68.1%. The full-year forecasts remain unchanged at operating revenue of ¥260,000 million, operating profit of ¥15,000 million and net profit attributable to owners of the parent of ¥13,000 million. Accordingly, Q1 progress rates were only 22.6%, 8.9% and 4.3%, respectively. Revenue is close to 25% of the year having elapsed, while profit is clearly progressing more slowly.

The company attributed the declines in revenue and profit mainly to the absence of the gains on real estate sales recorded in the previous consolidated fiscal year and higher financial expenses resulting from rising market interest rates. The loss of the real estate disposal gains is a one-off factor depressing the year-on-year comparison, but higher financial expenses caused by rising interest rates may persist in the fiscal year ending March 2027. Therefore, in FY2027-H1 it will be necessary to assess separately not only whether the year-on-year rate of decline in profit narrows, but also how much operating revenue accumulates on a basis excluding real estate disposal gains and whether higher financial expenses are being absorbed through business revenue or cost controls.

By business, Q1 operating revenue from cards and loans was ¥19,232 million, above ¥16,766 million in the same period of the previous year. Payments and guarantees also exceeded the prior-year level at ¥6,530 million versus ¥6,252 million, and bank guarantees rose to ¥9,725 million from ¥9,211 million. In contrast, individual instalment credit was ¥16,189 million, below ¥18,689 million, and overseas operations were ¥2,832 million, below ¥3,363 million. The overall decline in profit does not show how far growth in cards and loans and bank guarantees offset weakness in individual instalment credit and overseas operations, so the revenue amounts and year-on-year changes for each segment should continue to be monitored in H1.

Actual operating revenue and operating profit for the fiscal year ended March 2026 were ¥247,631 million and ¥14,444 million, respectively. The annual increases implied by the company’s forecasts for the fiscal year ending March 2027 are only ¥12,369 million in operating revenue and ¥556 million in operating profit. In other words, the company plan assumes relatively modest profit growth of 3.8%, compared with 5.0% growth in revenue. If cumulative operating profit progress does not improve substantially from 8.9% in H1, the company will need to explain the reasons for the back-loaded second half, its financial expense assumptions, progress in passing through prices and the quantitative effects of cost-control measures.