Revenue growth continues, but margin pressure and the delayed recovery in earnings will be the focus in FY2027-H1

Revenue in Q1 of FY2027 was ¥2,564 million, up 2.7% year on year. Operating profit was ¥269 million, down 4.4%, ordinary profit was ¥269 million, down 6.4%, and net profit attributable to owners of the parent was ¥161 million, down 7.0%. Revenue growth did not translate into earnings growth, and the divergence between revenue and earnings year on year is the first point to verify in the next results announcement.

The company maintained its FY2027 full-year forecasts of revenue of ¥10,823 million, operating profit of ¥1,287 million, ordinary profit of ¥1,255 million and net profit of ¥891 million. Q1 progress was 23.7% for revenue and 20.9% for operating profit. Revenue was close to the 25% of the year represented by one quarter, while operating profit was slightly below that level. Unless the company secures ¥643.5 million, or 50% of its full-year operating profit forecast, in H1, the required earnings level in H2 will be even higher.

Revenue in FY2026 was ¥10,007 million and operating profit was ¥1,174 million, for an operating margin of 11.7%. The operating margin implied by the FY2027 full-year forecast is 11.9%, so the plan does not assume a substantial improvement in margins. However, the Q1 operating margin was only 10.5% on a calculated basis. In the H1 results, it will be necessary to confirm not only the growth plan targeting revenue of ¥10,823 million, but also whether the operating margin has returned to around the previous year's 11.7%.

The company explained that lower profit in Q1 in the resource recycling business reflected higher labor costs associated with strengthening staffing at existing plants and raising wages. However, the Q1 materials did not provide a breakdown of the factors behind the declines in ordinary profit and net profit as specific as that provided for operating profit. In FY2026 as a whole, operating profit increased to ¥1,174 million, while ordinary profit was ¥1,174 million, down 18.0% year on year, and net profit was ¥890 million, down 13.8%. It will therefore be necessary to determine whether fluctuations in non-operating income and expenses or extraordinary gains and losses are continuing.

The company did not prepare a quarterly consolidated statement of cash flows for Q1, and did not disclose cash flow from operating activities, investing activities or financing activities. Cash flow and capital expenditure are normally available for review in H1, so the analysis should verify not only earnings recovery, but also whether higher revenue is converting into operating cash flow and whether cash outflows for site investments are within plan.