High first-quarter operating profit progress, but can it absorb higher costs in the first half?

Operating revenue for April to June 2026 was ¥1,375 million, up 4.0% from ¥1,322 million in the same period a year earlier. Operating profit was ¥136 million, up 52.3% from ¥89 million, while ordinary profit was ¥122 million, up 55.9%. Profit growth therefore significantly outpaced revenue growth. Strong tourism demand, an increase in visitors, and sales of events and commemorative tickets contributed to the increase in revenue.

First-quarter progress against the full-year forecast was 24.1% for operating revenue, calculated as ¥1,375 million ÷ ¥5,700 million, and 52.3% for operating profit, calculated as ¥136 million ÷ ¥260 million. Operating revenue was broadly in line with the simple 25% benchmark for one quarter, while operating profit had already exceeded half of the full-year target. However, the company has provided a full-year forecast but no first-half forecast, so the high first-quarter profit progress cannot be taken as an indication that the full-year target will be achieved.

The first-quarter operating margin is not disclosed in the earnings summary, but a simple calculation based on the disclosed figures produces approximately 9.9%. This exceeds the 9.6% margin for the fiscal year ended March 2026, but is well above the approximately 4.6% implied by the forecast operating profit of ¥260 million divided by operating revenue of ¥5,700 million for the fiscal year ending March 2027. The company explained that some repair work was shifted to the second quarter or later, reducing repair expenses and other costs from the same period a year earlier. The high first-quarter margin therefore includes the effect of the timing of expense recognition.

At the next first-half results announcement, it will be necessary to assess not only how far operating revenue exceeds the simple half-year benchmark of ¥2,850 million and operating profit exceeds ¥130 million, but also whether the standalone second quarter remains profitable. Based on first-quarter operating profit of ¥136 million, the standalone second-quarter operating loss must be no more than ¥6 million for first-half operating profit to remain at or above ¥130 million. It will also be important to see whether additional disclosure is provided on the amounts or year-on-year changes in repair expenses, personnel expenses, and electricity costs.