Revenue growth accompanied by lower operating profit, making cost absorption the focus in FY2027-H1

In Q1 of the fiscal year ending March 2027, operating revenue was ¥109,049 million, up 2.8% year on year; operating profit was ¥27,782 million, down 3.9%; ordinary profit was ¥24,722 million, down 4.9%; and net profit attributable to owners of the parent was ¥16,811 million, down 24.7%. Demand supported revenue growth, but profit declined from operating profit downward, indicating that revenue growth has not flowed through to earnings.

The full-year forecasts remain unchanged at operating revenue of ¥437,200 million, operating profit of ¥81,400 million, ordinary profit of ¥69,000 million and net profit attributable to owners of the parent of ¥50,000 million. Q1 progress was 24.9% for operating revenue, 34.1% for operating profit and 33.6% for net profit, meaning that profit was ahead of a simple one-quarter benchmark. However, given the seasonality of peak periods in the railway business and the timing of expenses, it will be important in FY2027-H1 not only to see whether operating profit reaches around ¥40,700 million, but also whether the first-half margin can be maintained at the level of the same period last year.

The earnings presentation cited a ¥2.3 billion increase in passenger transportation revenue, a ¥0.1 billion increase in real estate revenue and a ¥0.1 billion increase in life and business services revenue as drivers of higher operating revenue, while explaining that operating expenses increased by approximately ¥4.0 billion. The breakdown was a ¥2.2 billion increase in personnel expenses, a ¥1.0 billion increase in other expenses and a ¥0.7 billion increase in depreciation, totalling approximately ¥3.9 billion. The financial summary shows Q1 depreciation of ¥18,856 million, confirming that the burden of capital investment and renewals remains as fixed costs.

The 24.7% decline in net profit, substantially greater than the decline in operating profit, also warrants attention. The comparison was affected by a gain from the revision of the retirement benefit plan recognised in the same period of the previous year, so the decline in operating earnings needs to be considered separately from the decline in final profit caused by one-off items. In FY2027-H1, we will look for the year-on-year change in operating profit, the change in operating expenses and depreciation, and whether one-off items related to extraordinary gains and losses or retirement benefits have recurred. No cash flow statement was prepared for Q1, so the extent of additional disclosure of operating cash flow, capital expenditure and financing in the first-half results will also be monitored.