Q1 revenue rose but margins fell; testing the ability to absorb costs in the first half

Operating revenue in the first quarter of the fiscal year ending March 2027 was ¥2,389 million, up 9.2% from ¥2,189 million a year earlier. Operating profit, however, was ¥96 million, below approximately ¥100 million a year earlier and down 2.9% year on year. Ordinary profit was also down 6.4% to ¥138 million, while quarterly net profit fell 8.0% to ¥94 million, indicating that higher revenue has not flowed through to operating profit or lower profit lines.

The operating margin calculated from operating revenue and operating profit declined by approximately 0.5 percentage points, from approximately 4.6% a year earlier to approximately 4.1% in Q1. The operating margin for the previous full year was 3.8%, improved from 2.8% two years earlier. The issue this time is therefore not the margin level itself, but whether the profitability improved in the previous year can be maintained in the current year. The forecast for the fiscal year ending March 2027 is operating revenue of ¥9,400 million and operating profit of ¥350 million, implying an operating margin of approximately 3.7%. Q1 performance is not immediately below the full-year forecast, but the year-on-year margin decline is a change that should be monitored.

The company explained that operating revenue increased because orders from major customers remained firm, while weak cargo movement for imports under yen depreciation and higher miscellaneous costs weighed on operating profit. However, no quantitative breakdown was provided showing the impact of higher costs, which cost items in cost of sales or selling, general and administrative expenses increased, or how much of the increase was absorbed by higher revenue. In the first-half results, we will assess whether the increase in operating revenue continues and whether the specific amount or itemized breakdown of higher costs is disclosed.

Q1 operating profit represented approximately 27.7% of the full-year forecast of ¥350 million, while operating revenue represented approximately 25.4% of the forecast of ¥9,400 million, broadly in line with the 25% elapsed-quarter benchmark. The simple first-half benchmarks are operating revenue of ¥4,700 million and operating profit of ¥175 million, but seasonality exists in the logistics business, so 50% cannot be treated as the company's official first-half target. Next time, we will test whether the cumulative first-half operating margin exceeds Q1's 4.1% and whether the cost environment has deteriorated enough to require the full-year forecast to be maintained or revised.