Revenue is on plan, but operating profit is progressing slowly

Revenue for 1Q of the fiscal year ending March 2027 was ¥15,459 million, up 0.6% year on year. Operating profit, by contrast, was ¥1,077 million, down 49.9%, and the operating margin fell approximately 7 percentage points, from about 14.0% in the prior-year quarter to about 7.0%. Although revenue remained roughly at the prior-year level, the profit ramp-up was clearly weak.

The full-year forecasts are revenue of ¥61,600 million, operating profit of ¥6,000 million, ordinary profit of ¥5,000 million and net profit attributable to owners of the parent of ¥2,100 million, with no revisions as of 1Q. Progress rates in 1Q were 25.1% for revenue, 18.0% for operating profit, 33.4% for ordinary profit and 42.8% for net profit. Operating profit must reach ¥4,923 million over the remaining 9 months, meaning that 82.1% of the annual target must be accumulated from 2Q onward. How far operating profit has recovered by H1 will be an important turning point in assessing the achievability of the full-year forecast.

The company cites lower utilization of vessels sold, the weaker yen and higher vessel expenses due to an increase in the number of vessels entering dry dock as factors behind the decline in operating profit in the ocean-going shipping business. In the hotel-related business, higher operating expenses including personnel costs were cited, while in the real estate leasing business, higher utilization of properties acquired in the previous fiscal year and a greater depreciation burden were indicated. However, the impact of each factor and detailed volume and unit-price breakdowns for the number of vessels entering dry dock, vessel expenses and personnel costs have not been disclosed. Achieving the operating profit plan will require these cost factors to normalize from 2Q onward, rather than merely a recovery in revenue.

In the next results, the focus will be on cumulative H1 revenue and operating profit, as well as the extent to which operating profit recovered in 2Q alone. In particular, the key issues will be whether operating profit has moved closer to the pace required to achieve the full-year target from the 1Q level of ¥1,077 million, whether the operating margin has improved from around 7.0%, and whether the ¥593 million difference between ordinary profit of ¥1,670 million and operating profit of ¥1,077 million is attributable to a recurring or temporary factor.