The focus is on achieving the ¥42.0 billion revenue and ¥2.6 billion operating profit targets after the downward revision

Nine-month revenue was ¥30.648 billion, down 0.4% from ¥30.760 billion in the year-earlier period. Operating profit was also down 12.3%, to ¥2.029 billion from ¥2.314 billion. Operating profit declined more sharply than revenue, indicating that cost pressures are weighing on margins in addition to any mere shift in order timing.

By the third-quarter results, the company had lowered its full-year forecasts from ¥45.0 billion in revenue and ¥3.0 billion in operating profit to ¥42.0 billion and ¥2.6 billion, respectively. Nine-month progress against the revised forecasts was approximately 73.0% for revenue and 78.0% for operating profit. Although profit progress exceeded revenue progress, these figures follow a downward revision to the full-year forecasts and provide limited grounds for optimism about achieving the plan.

On a simple calculation, the company needs to record ¥11.352 billion in revenue and ¥571 million in operating profit in the fourth quarter. In the prior fiscal year, fourth-quarter revenue and operating profit were ¥10.831 billion and ¥542 million, respectively, calculated by subtracting nine-month results from full-year revenue of ¥41.591 billion and operating profit of ¥2.856 billion. Accordingly, achieving the current forecasts requires approximately 4.8% year-on-year revenue growth and approximately 5.4% growth in operating profit.

As deliveries to public-sector customers are seasonally concentrated in the second quarter, caution is warranted in judging the success or failure of the annual plan based solely on fourth-quarter figures. At the same time, the company cited delays in the passage and ordering of public-works budgets, as well as higher personnel and other costs, as reasons for the downward revision. The next results will need to clarify whether this is merely a seasonal factor or whether delayed projects have been pushed into the next fiscal year.

The final results should be reviewed not only for achievement of ¥42.0 billion in revenue and ¥2.6 billion in operating profit, but also for the timing of order backlog conversion into revenue, the profitability of projects concentrated at fiscal year-end, the rates of increase in outsourcing and personnel costs, and the next fiscal year's forecasts. In particular, even if the full-year forecasts are not revised again, it will be important to determine whether fourth-quarter operating margin exceeded the year-earlier level and whether profit was supported by a temporary project mix.