Q1 profit plunged on the pullback in disaster-waste treatment, with H1 delivery against the upgraded forecast the key focus

Consolidated revenue in Q1 was ¥27,448 million, operating profit was ¥2,001 million, ordinary profit was ¥1,830 million, and net profit attributable to owners of the parent was ¥1,177 million. The operating margin fell 16.3 percentage points, from 23.6% in the same period a year earlier to 7.3%, meaning profit declined more sharply than revenue. The company cited as the main factor the fact that its disaster-waste treatment support business related to the Noto Peninsula Earthquake had largely wound down in the previous fiscal year.

By segment, revenue in the waste treatment and recycling business was ¥7,773 million and operating profit was ¥1,051 million, down 51.8% and 85.2%, respectively, from the same period a year earlier. The earnings-bridge analysis in the results presentation showed that the business reduced consolidated revenue by ¥8,351 million and operating profit by ¥6,070 million. Meanwhile, the resource recycling and renewable energy businesses increased revenue by ¥2,569 million and ¥1,232 million, respectively. In terms of operating profit, however, the ¥1,147 million increase from resource recycling was partly offset by a ¥375 million decline from renewable energy.

The full-year forecast has been revised upward to revenue of ¥107,400 million, operating profit of ¥8,700 million, ordinary profit of ¥7,800 million, and net profit of ¥5,000 million. The H1 forecast is revenue of ¥53,500 million, operating profit of ¥3,600 million, ordinary profit of ¥3,300 million, and net profit of ¥2,000 million. Q1 results represent 25.6% of the full-year revenue forecast and 23.0% of the full-year operating profit forecast. Achieving the H1 forecast requires Q2 revenue of ¥26,052 million and operating profit of ¥1,599 million. The key issue will be how far the margin can recover from Q1's 7.3%.

The company raised its forecasts on the grounds that its 3 main segments were progressing ahead of plan, but its Q1 materials did not disclose the risk amounts incorporated into the full-year forecast or the segment-level profit required for the remaining period. At the H1 results, we want to quantify how much profit growth is coming from the existing businesses excluding the pullback in disaster-waste treatment, and which segments will deliver the ¥3,600 million forecast after the upward revision.