Revenue is increasing, but operating profit is lagging the full-year forecast, making recovery in FY2027-H1 the focus

Revenue in the first quarter of FY2027 was ¥1,007,962 million, up 9.8% from ¥917,791 million in the same period of the previous year. However, operating profit was only ¥20,371 million, down 84.2% from ¥128,949 million. Ordinary profit also fell 60.8% to ¥52,822 million, indicating that revenue growth has not translated directly into operating profit growth. The first-quarter operating margin was approximately 2.0%, sharply down from approximately 14.0% in the same period of the previous year.

The full-year forecasts are revenue of ¥4,500,000 million, operating profit of ¥250,000 million, ordinary profit of ¥290,000 million and net income attributable to owners of the parent of ¥310,000 million. Revenue progress at the first-quarter stage was approximately 22.4%, close to the 25% elapsed in the fiscal year. Operating profit progress, however, was only approximately 8.1%, a shortfall difficult to explain by seasonality alone. The full-year operating margin is also assumed to be approximately 5.6%, half the 10.8% achieved in FY2026.

Accordingly, in FY2027-H1 it will be necessary to confirm not only the amount of operating profit but also whether the margin on revenue has risen from 2.0% in the first quarter. If lower earnings in the energy business, a wider loss in the transmission and distribution business, and the effects of fuel costs and the nuclear capacity factor overlap, a further substantial year-on-year decline in first-half operating profit would reduce the likelihood of achieving the full-year forecast of ¥250 billion. Conversely, if the standalone second-quarter margin improves and the first-half cumulative decline narrows from the first quarter's 84.2%, this could be viewed as a sign of recovery in line with the company plan.

The first-quarter summary did not disclose cash flow from operating activities, cash flow from investing activities, cash flow from financing activities or the period-end cash balance. At the interim results, it will be necessary to assess from a cash perspective as well as through earnings whether the decline in profit has affected operating cash flow or investment capacity, and whether the full-year earnings forecast has been revised.